Saturday, December 7, 2019

Commercial Printing: Consolidation or Regional Expansion? – November 2019 M&A Activity


Three out of every four transactions in the commercial printing business are structured as a “tuck-in.” The buyer folds the acquired customers into their existing production capacity, hires selected qualified employees, with special focus on those people that touch the customer, and maybe cherry-picks some of the equipment. The seller is left to close up shop, sell off the remaining equipment and wind-down the business entity.

What about the one out of four transactions that is not a tuck-in? Is another trend emerging in the consolidating commercial printing segment?

Mittera Group, the Iowa-based commercial printing juggernaut, acquired the business assets of Chicagoland commercial printer Fuse. Mittera is now the most active consolidator in the commercial printing segment and arguably the only player on the national stage since the heady days when CGX and Mail-Well, fueled by debt and public stock, were competing to build out national multi-location commercial print production platforms. Privately held Mittera is now a “roll-up of roll-ups,” snapping up smaller consolidators when they become available for purchase. (See The Target Report: December 2018, Consolidation in Commercial Printing Rolls On).

Fuse was the mini roll-up comprised of the former Kelmscott Communications, Rider Dickerson and Buhl Press. The three companies were mashed together in 2016 with reported combined revenues of $40 million. As is the case with seventy-five percent of all acquisitions in the commercial printing business, the driving logic behind the creation of Fuse was the consolidation of the operations of all three companies. After a build-out of the Buhl Press facility in Berkeley, Illinois, the other two production facilities were shuttered and the business “tucked-in” under one roof. The Fuse roll-up rolled onward in 2018 with the acquisition of Digital Hub, but then stalled. Now Fuse has itself become the acquisition target of the much larger Mittera.

However, the Fuse deal is different than the great majority of acquisitions that we list in The Target Report in the commercial printing segment in which the acquired facility is closed. In this case, Mittera has announced plans to continue operating in the Fuse facility. According to the new president of the Fuse business, now rebadged Mittera Chicago, the company is committed to “grow our Chicagoland presence,” indicating that the acquisition of Fuse will not be another closure and tuck-in. Rather, the deal represents a regional expansion of Mittera’s production footprint.

Knepper Press, the diversified printing services company located adjacent to the Pittsburgh International Airport, purchased Dual Print & Mail in upstate New York.* Dual Print & Mail was formerly owned by digital direct mail printer Compu-Mail which had acquired the troubled web and sheetfed printer in 2014. Compu-Mail’s goal was to secure a reliable local source for offset printing that was adjunctive to its core digital direct mail business. After effecting a turnaround of Dual Print & Mail, Compu-Mail decided to exit the offset business.

In what turned out to be fortuitous timing for Dual Print & Mail, Knepper Press had earlier this year acquired TBN, the commercial printing business of The Buffalo News. The acquisition of TBN was a strategic move to reach into the Buffalo, New York region. (See The Target Report: April 2019, Commercial Printing and Convergence of Diversified Services). Operating from its secure position in the Pittsburgh market, Knepper’s next step was to acquire a production facility in the upstate New York region to support and augment the newly acquired TBN business. The acquisition of Dual Print & Mail cements the regional expansion strategy and brings a second fully equipped web and sheetfed offset facility under Knepper’s ownership and management.

Knepper Press and Dual Print & Mail will continue to operate as separate stand-alone facilities, sharing resources and seeking to achieve increased efficiencies across a multi-plant production platform. Unlike Mittera, Knepper’s plan does not appear to be part of a larger roll-up strategy, rather the acquisition was a strategic expansion into another metropolitan region that is within a reasonable driving distance from the company’s core market. But, at least in one respect, Knepper’s purchase of Dual Print & Mail is similar to the Mittera acquisition of Fuse; unlike the majority of deals in commercial printing; the plants in these two cases will continue to operate.

A similar expansion strategy has been methodically executed by Drummond, a commercial printing and graphic services company headquartered in Jacksonville, Florida. Through a series of acquisitions, beginning in 2012, Drummond has built out a considerable commercial printing presence in the greater Atlanta, Georgia metropolitan area. While some of the Drummond acquisitions have been consolidated into a unified production platform via classic “tuck-in” transactions, the company has clearly committed to building a permanent presence in the Atlanta market while maintaining their original Florida operation. Most recently, Drummond acquired PSP Retail with 90,000 square feet of production space in Decatur, Georgia. The acquired company produces in-store graphics and signage. According to the CEO of Drummond, the acquisition resulted in “two complimentary operations” in the Atlanta market. There was no mention of a tuck-in of acquired operations into one of the company’s existing facilities.

Mittera, Knepper and Drummond represent a sub-trend within the larger market for commercial printing companies. Each has established a strong core geographic base (e.g. Des Moines, Pittsburgh, Jacksonville) and is growing strategically by establishing a stake in a new region and then building out from there with additional acquisitions (or in the case with Mittera, acquiring former consolidators).

However, we do not expect the basic underlying dynamic in the commercial printing segment to change. Demand for commercial printing services is predicted to decline, albeit at a rate that is less drastic than in the past decade. That decline will drive more consolidation. These market conditions mean that in all likelihood three out of every four transactions will continue to be “tuck-ins” in which the acquired business is closed, and customers and key employees are transitioned to the acquirer’s existing production facility. Nonetheless, we note that another trend is emerging in which financially healthy and operationally efficient regional companies leapfrog to an adjacent metro market and build out an additional geographic market position via a series of strategically sound acquisitions.


Diversified Graphic and Marketing Services

H.I.G. Capital is on a tear, making significant investments in print-centric companies, and now is invested across the printing industry, from digital to display to direct mail.



In its latest move, H.I.G. portfolio company Vision Integrated Graphics has acquired SourceLink Acquisition. The acquired company provides personalized marketing solutions using proprietary data modeling. Notably, the purchase includes the New York-based boutique digital agency Path Interactive which SourceLink acquired in 2018.

While both Vision Integrated Graphics and SourceLink Acquisition are prodigious producers of direct mail and other print-centric graphic communications, the sizzle is in the data-analytics, predictive modeling, creative services and multi-channel execution that drives higher response rates. Layered on top of, and obscuring the company’s core print production, SourceLink touts its digital team and non-print services including SEO, paid search, social media, digital media, design, and video production.

Despite the dominance of digital marketing services in the customer-facing messages from Vision and SourceLink, it’s clear from the roster of H.I.G. acquisitions over the past several years that this global private equity powerhouse believes in the future of print.


* Graphic Arts Advisors, publisher of The Target Report, served as exclusive advisors to Dual Print & Mail in this transaction.

2019 November - Mergers and Acquisitions in the Printing, Packaging, Paper & Related Industries

Deal Party #1
(Surviving Entity)
Pre-Deal
Revenues
($Mil )


Party #1 Address


Deal Party #2
Pre-Deal
Revenues
($Mil )


Party #2 Address
Date
Deal
Public
Deal
Value
($Mil)

Deal Structure
(Intermediary)


Notes

Press
Release
Knepper Press No Data Clinton, PA Dual Print & Mail No Data Cheektowaga, NY 11/29/19 No Data Merger
(Graphic Arts Advisors)
Commercial printing Link
Impact No Data Minneapolis, MN Infinity Direct No Data Plymouth, MN 11/27/19 No Data Acquisition Direct mail marketing Link
All American Label and Packaging No Data Dublin, CA Label Art of California No Data Oakland, CA 11/22/19 No Data Acquisition Label printing Link
Avery Dennison $7,070 Glendale, CA Transponder Business
(Div. Smartrac)
$140.0 Amsterdam,
The Netherlands
11/21/19 $252 Acquisition RFID Inlays Link
Mittera Group No Data Des Moines, IA Fuse No Data Berkeley, IL 11/21/19 No Data Asset Acquisition Commercial printing Link
Vision Integrated Graphics
(Port co. H.I.G. Capital)
No Data Bolingbrook, IL SourceLink Acquisition No Data Itasca, IL 11/21/19 No Data Acquisition Direct Mail & Marketing Link
J.S. McCarthy Printers ESOP No Data Augusta, ME J.S. McCarthy Printers No Data Augusta, ME 11/20/19 No Data Acquisition Commercial printing Link
CFS No Data Norton, MA The Field Companies No Data Watertown, MA 11/15/19 No Data Acquisition Print & fulfillment services Link
CCL Industries $4,035 Toronto, ON Stuck on You Holdings $8.3 Breakwater,
Australia
11/14/19 $8.1 Acquisition Customized labels Link
Walker360 No Data Montgomery, AL American Printing Co No Data Birmingham, AL 11/12/19 No Data 363 Sale in Ch. 11 Commercial printing Link
POS Professional Office Services No Data Waterloo, IA Palmer Printing No Data Waite Park, MN 11/11/19 No Data Acquisition Commercial printing Link
AR Metallizing
(Div. Nissha)
No Data Genk, Belgium Eurofoil Paper Coating No Data Berlin, Germany 11/8/19 No Data Acquisition Specialty substrates Link
Global Graphics No Data Cambridge, UK Xitron
(Div. Vanguard Graphics Int'l)
$4.8 Ann Arbor, MI 11/8/19 $4.5 Acquisition Print imaging software Link
Fujifilm $20,846 Tokyo, Japan Fuji Xerox $11,100 Tokyo, Japan 11/5/19 $2,300 Buyout of Minority Digital printing devices Link
Stouse
(Port co. Goldner Hawn)
No Data New Century, KS Magna-Plus No Data Kansas City, KS 11/4/19 No Data Acquisition Label printing & promo Link
Northwestern Printers Mngt. No Data Hays, KS Northwestern Printers No Data Hays, KS 11/2/19 No Data Mngt. Buyout Printing & copying Link


2019 November - Bankruptcy Filings in the Printing, Packaging, Paper & Related Industries



Filing Party

Date
Case
Filed
Pre-Petition
Revenues
($Mil )



Case #



Filing Party Address



Circuit



Region & City



Judge



Attorney for Debtor



Notes
Chapter 11 Filings:
First Class Printing, Inc. 11/6/19 No Data 19-14730 Fayetteville, TN 6th Eastern TN
Chattanooga
Shelley D. Rucker Steven L. Lefkovitz Commercial printing
Beach Mountain Press, Inc.
(DBA Minuteman Press)
11/18/19 No Data 19-71508 Roanoke, VA 4th Western VA
Roanoke
Paul M. Black Richard Daniel Scott  Printing & copying
J&M Printing, Inc. 11/12/19 No Data 19-27028 Rocklin, CA 9th Eastern CA
Fresno
Fredrick Clement Dale A. Orthner Commercial printing


2019 November - Non-Bankruptcy Closures in the Printing, Packaging, Paper & Related Industries



Closed Company / Facility

Date of Closure
Pre-Closure
Revenues
($Mil )



Closing Address
Related Party Related Party
Address
Date Closure Public


Notes

Press
Releases
Impika inkjet manufacturing facility TBD No Data Aubagne, France Xerox Norwalk, CT 11/26/19 Inkjet production Link
LSC Communications - Printing facility Dec-19 No Data Philadelphia, PA LSC Communications Chicago, IL Nov-19 Bible printing Link
American Printing 1/30/20 No Data Birmingham, AL N/A None Nov-19 Commercial printing Link
Melnor Graphics 2/10/20 No Data Toledo, OH N/A None Nov-19 Retail insert printing Link

Thursday, November 7, 2019

Market for Label Printing Catches Fire – October 2019 M&A Activity


The number of M&A transactions in the label printing segment shot up in October after several rather tepid months including three months in the last twelve in which we found no acquisitions of label printing companies. One reason for the slow pace of new label deals may be because valuations are reportedly at record highs for companies that print labels. With purchase price multiples near or even exceeding double digits, buyers in the label segment are being especially careful, extending due diligence and digging deep to make sure the high price is warranted. Nonetheless and despite high valuations, competition for the most viable acquisition candidates is stiff and almost entirely fueled by large private equity funds seeking to build out their existing label platforms. Without exception, recent deals have been backed by investment funds with billions of dollars to invest. Smaller players are being priced out of the action.

ProMach acquired Jet Label, based in Edmonton, Alberta. With over $827 million in total revenues, ProMach’s primary business is not label printing and converting, rather the company mostly designs and manufactures over 300 models of machinery that make, fill, cap, close, seal, wrap, convey and transport a wide variety of packaging types. With the acquisition of Jet Label, the company expands its limited, but growing, presence in label printing and converting. The addition of Jet Label adds a seventh label converting facility to the six existing converting plants that extend from California to New Hampshire. A sideline of the much larger machinery business, ProMach’s ID Technology division provides its customers with prime labels, printed tapes and coding systems that complement the packaging processes enabled by the core equipment side of the business. Leonard Green & Company, the private equity fund that owns ProMach, traces its roots back to 1969 and the early days of the private leveraged buyout. The fund now has more than $23.5 billion under management.

Label rollup company Fort Dearborn acquired substantially all of the assets of Walle Corporation, a label printing company located in Alpharetta, Georgia. Walle ran into financial difficulty and liquidity constraints which led to the marketing and sale of the company. The acquired assets include an offset plant in New Orleans that produces cut and stack paper labels, as well as film and in-mold labels. The company also has a flexo plant in Winchester, Kentucky that produces roll-fed and shrink-sleeve labels. Fort Dearborn has appeared on The Target Report deal logs five times as the buyer and in 2016 as the seller when the company was acquired by private equity firm Advent International. (See The Target Report: August 2016, Private Equity Loves Labels). Advent is truly international, with investments in 41 countries and $54.3 billion under its management. Company owners in the commercial printing segment will also know of one of Advent’s other portfolio companies, Williams Lea Tag, the print management company. Printing company owners cringe and prepare for hardball negotiating upon learning that one of their clients is shifting their print spend to Williams Lea. (See The Target Report: August 2017, Williams Lea Tag is on the Move).



Inovar Packaging Group, based in Dallas, acquired Flexo-Graphics, a label printing company located in Butler, Wisconsin. The acquisition establishes Inovar in the Midwest in addition to its plants in New England, Florida and Texas. Inovar has enjoyed the financial sponsorship of AEA Investors since 2016 and has appeared as a buyer of label companies six times on our deal logs since. AEA Investors is also a big player in the rigid plastic and glass packaging segments, having acquired TricorBraun, also in 2016. AEA Investors is not a newcomer to the private equity business and does not seek institutional investors, rather it’s more of a “super family office” that was founded in 1968 by Rockefeller, Mellon and Harriman family interests. With over $15 billion under management, the fund includes more than “75 participants who include some of the world’s pre-eminent industrial families, business executives and former government leaders” who clearly believe that packaging is a good investment.

PPC Flexible Packaging, a portfolio company of Morgan Stanley Capital, has acquired Popular Ink from Highlander Partners. Popular Ink, located in McKinney, Texas, produces pressure sensitive labels, as well as shrink sleeves and various forms of flexible packaging including stick packs, pouches and stand-up bags. Earlier this year, PPC acquired HFM Packaging, the same month that Platinum Equity purchased label printer Multi-Color Corporation and merged it with WS Packaging, forming one of the largest of the consolidations in the segment. (See The Target Report: February 2019, Platinum Equity Likes Print). Morgan Stanley Capital Partners is the private equity segment of Morgan Stanley, the financial services firm with over $40 billion in annual revenues.

Fortis Solutions Group, usually an active participant in the stiff competition for desirable acquisition targets in the label segment, recently chose instead to go down the organic path to growth and opened a greenfield startup plant in Napa, California. The new plant was established specifically to focus on the wine, craft beer and spirits industries. The new facility will operate both flexo and digital offset presses. However, don’t count Fortis out of the acquisition game; the company earlier this year acquired Infinite Packaging from Svoboda Capital Partners which itself had rolled up several label printers to create Infinite. Fortis is a portfolio company of Main Post Partners. Main Post is a relative newcomer to the private equity scene, established in 2014 with “only” $1.1 billion now under its management.

Eschewing the more lucrative exit route in the hot label segment and not selling to a private equity-backed rollup, Macaran Printed Products, located in Cohoes, New York, has become a 100% employee owned company. The owner noted that he chose the ESOP route when selling the company to protect and reward his 55 employees. The company primarily prints pressure sensitive labels. The new owners, the employees, will need to work diligently and find ways to fund ESOP requirements and still be able to reinvest in the latest technology needed to survive and grow in the consolidating and highly competitive label business. As evidenced by the recent M&A trends in the label printing segment, their competitors are increasingly owned by and financially supported by super-sized investment funds that will invest to grow their label printing platform companies.

Commercial Printing and Diversified Services

Transcontinental, the largest printing company in Canada, which has been laser-focused on transforming itself from a magazine and newspaper publisher and printer into a packaging company, veered off course and acquired Holland & Crosby. The purchased company is based in Mississauga, Ontario and produces wide format printing and in-store displays for retail. Since we first wrote about Transcontinental and its transformative strategy back in 2014, the company has been a consistent serial acquirer of flexible packaging assets, culminating in the mega deal in which the company acquired Coveris Americas. Over the same time period, Transcontinental methodically divested newspaper and non-differentiated commercial printing assets. The acquisitions and divestitures combined to make packaging the source of more than half of the company’s revenues. (See The Target Report: April 2018, Getting Flexible in Your Middle Years).

As we noted in our annual review of M&A activity in September, there has been an increase in the number of acquisitions of mailing service and fulfillment-related companies over the past two years. In that vein, Court Square Capital Partners acquired Lakewood, New Jersey-based J. Knipper and Company. Knipper provides direct mail and fulfillment services exclusively to the pharmaceutical, biotech and medical device markets. Specialized services include sample programs that require stringent compliance with FDA and other regulatory agencies. Direct mail and print management are part of a larger “value-added” offering.

H.I.G. Capital once again voted with its wallet and expressed confidence in print-centric businesses with a major “growth investment” in Circle Graphics. Based in the Denver area, Circle Graphics is a highly focused powerhouse in the production of outdoor advertising graphics for the billboard industry. According to industry sources, the company has established itself as the low-cost provider utilizing custom-made digital printers and in-house ink production, effectively dominating the outdoor market. A second division of Circle Graphics provides personalized custom wall d├ęcor as well as pre-designed art images, serving the growing market for creating highly individualized environments utilizing digital printing technologies. 


2019 October - Mergers and Acquisitions in the Printing, Packaging, Paper & Related Industries

Deal Party #1
(Surviving Entity)
Pre-Deal
Revenues
($Mil )


Party #1 Address


Deal Party #2
Pre-Deal
Revenues
($Mil )


Party #2 Address
Date
Deal
Public
Deal
Value
($Mil)

Deal Structure
(Intermediary)


Notes

Press
Release
ProMach
(Port co Leonard Green & Partners)
$827.0 Covington, KY Jet Label No Data Edmonton, AB 10/31/19 No Data Acquisition Label printing Link
Fort Dearborn
(Port co. Advent International)
$478.1 Elk Grove, IL Walle No Data Alpharetta, GA 10/31/19 No Data Asset Acquisition
(SSG Capital Advisors)
Label printing Link
Graphic Systems Services No Data Springboro, OH Global Web Finishing No Data Merrillville, IN 10/29/19 No Data Acquisition Web finishing systems Link
Paragon Group $1,300 London, UK Euro Global Document Solutions
(Div. R.R. Donnelley)
$270.0
($6,410)
Chicago, IL 10/28/19 No Data Acquisition Document management Link
H2 Equity Partners No Data Amsterdam, Netherlands Contiweb
(Port co. American Ind. Partners)
No Data Boxmeer, Netherlands 10/23/19 No Data Acquisition Web handling systems Link
Macaran Printed Products ESOP No Data Cohoes, NY Macaran Printed Products
(Div. W.N. Van Alstine & Sons)
No Data Cohoes, NY 10/16/19 No Data Sale to ESOP Label printing Link
Inovar Packaging Group
(Port co. AEA Investors)
No Data Dallas, TX Flexo-Graphics No Data Butler, WI 10/15/19 No Data Acquisition Label printing Link
Solutions in Print $17.0 Davenport, IA Performance Group No Data Omaha, NE 10/15/19 No Data Acquisition
(Corp Dev Assoc)
Print management Link
Schneps Media No Data New York, NY AM New York
(Prop. Newsday)
No Data Melville, NY 10/11/19 No Data Acquisition Community newspaper Link
Atar Capital No Data Los Angeles, CA Keypoint Intelligence
(InfoTrends & Buyers Lab)
No Data Fairfield, NJ 10/10/19 No Data Acquisition Digital imaging analysis Link
PPC Flexible Packaging
(Port co Morgan Stanley Capital)
No Data Buffalo Grove, IL Popular Ink
(Port co Highlander Partners)
No Data McKinney, TX 10/9/19 No Data Acquisition Flexible packaging & labels Link
Inland Press Association
(America's Newspapers)
No Data Des Plaines, IL Southern Newspaper Publishers Association No Data Atlanta, GA 10/8/19 No Data Merger Trade association Link
Novolex
(Port co. Carlyle Group)
No Data Hartsville, SC Zenith Specialty Bags No Data City of Industry, CA 10/4/19 No Data Acquisition Food packaging Link
Court Square Capital Partners No Data New York, NY J. Knipper and Company No Data Lakewood, NJ 10/2/19 No Data Acquisition Direct mail & fulfillment Link
H.I.G. Capital No Data Miami, FL Circle Graphic Holdings No Data Longmont, CO 10/2/19 No Data Investment Out-of-home graphics Link
Transcontinental $1,957 Montreal, QC Holland & Crosby No Data Mississauga, ON 10/2/19 No Data Acquisition
(New Direction)
Wide format, in-store display Link


2019 October - Bankruptcy Filings in the Printing, Packaging, Paper & Related Industries



Filing Party

Date
Case
Filed
Pre-Petition
Revenues
($Mil )



Case #



Filing Party Address



Circuit



Region & City



Judge



Attorney for Debtor



Notes
Chapter 11 Filings:
Tiger Oak Media, Incorporated 10/7/19 No Data 19-43029 Minneapolis, MN 8th Minnesota
Minneapolis
Michael E. Ridgway Steven B. Nosek Regional magazine publishing
No Chapter 7 Filings Found this Month --- --- --- --- --- --- --- --- ---


2019 October - Non-Bankruptcy Closures in the Printing, Packaging, Paper & Related Industries



Closed Company / Facility

Date of Closure
Pre-Closure
Revenues
($Mil )



Closing Address
Related Party Related Party
Address
Date Closure Public


Notes

Press
Releases
Sentinel Printing Dec-19 No Data St. Cloud, MN CJK Group Brainerd, MN Oct-19 Consolidating plants Link
Family Circle Magazine Dec-19 No Data Des Moines, IA Meredith Des Moines, IA Oct-19 Ceasing publication Link
Keystone Millbrook Dec-19 No Data Grand Ledge, MI N/A None Oct-19 Commercial printing Link
CRT Custom Products Dec-19 No Data Whites Creek, TN N/A None Oct-19 Folding cartons Link