Tuesday, March 7, 2017

Transformation of a Legacy Print Business – February 2017 M&A Activity





You might think that Deluxe, the leading printer of paper checks, is facing insurmountable headwinds as consumers (especially the millennial generation) abandon paper checks for electronic payment methods. However, Deluxe long ago realized that it was not a printing company, rather it serviced the financial services industry, and with that mindset it recently announced another transformational acquisition with the purchase of RDM Corporation. The acquired company does not print, rather it converts traditional printed documents, the simple check, into a digital document via its mobile deposit capture software or through its check scanning systems. Talk about serving your formerly print-centric clients (banks and consumers) with technology that creates a bridge to the future. The Deluxe history of recent acquisitions illustrates a deliberate journey from its paper-based origins to a highly diversified company that includes, but is not totally dependent on, printed products.

The process of transitioning from print to digital documents and services is not a new development for Deluxe. In its latest annual report, Deluxe reported that 30 percent of its $1.8 billion annual revenue was in non-print “marketing and other services.” The portion of non-print revenues was even higher, 37 percent, within its financial services segment. Just last month, Deluxe announced another acquisition, purchasing First Manhattan Consulting Group (FMCG Direct). FMCG is a direct mail and marketing company that serves financial institutions with marketing analytics, proprietary research, and target market segmentation models that drive higher response rates. Creative campaign design and production management round out the service offerings. There is nary a mention of print on the acquired company’s website, even though FMCG’s final deliverable product is direct mail. Notable for our readers interested in transaction values is the purchase price of $200 million which was reported to be 2.35 to 2.5 times projected 2017 revenues of $80 to $85 million. In another acquisition of a data analytics company that improves marketing programs, and illustrative of its clear strategic acquisition plan, Deluxe acquired Datamyx in 2015.

Meanwhile, the traditional check printing business continues to decline both in revenues and profits, with sales down 7.8% year-over-year for the fourth quarter of 2016. Despite the steady decline in its traditional business, overall company revenues have increased due to the company’s acquisitions that are strategically focused on marketing solutions and other related services.

Deluxe began printing paper checks in 1915. In 2017, the company still prints checks, but also provides sophisticated marketing services, financial processing services, as well as hosting more than 950,000 websites for small businesses. That’s transformation!

Consumer Web-to-Print

Despite a crowded market in the online photo book printing segment, Utah-based Chatbooks raised $11.5 million in a Series B funding led by Aries Capital Partners, bringing total angel and VC investment in the startup to over $20 million. Founded by a photo-book-worthy mom-and-pop couple with seven children, the company approached the photo book market with two propositions, keep it simple and make it accessible via mobile.

The online photo book printing industry in the US is now estimated to be in excess of $2 billion annually and has been growing at an 11.7% rate with over 850 companies competing one way or another in the segment. In a few short years, the business has become highly competitive; a simple online search reveals a plethora of companies offering deep discounts from list pricing. The largest player in the segment, publicly traded Shutterfly, finished 2016 with over $1 billion in revenue. So how did the Johnny-come-lately startup Chatbooks convince investors to fund another round in a printing service? It may have something to do with the company’s brilliant use of online videos featuring a harried mother explaining how simple it is to order their printed photo books. The online videos are a viral phenomenon, driving viewers via social media to their website and ultimately enough folks load the mobile app and begin ordering printed photo books.




Commercial Printing – Diversified Services

Orora, the Australian company that has entered the retail display segment in a big way over the past year continued its acquisition spree in February, announcing the simultaneous purchase of the Garvey Group based in Niles, Illinois and Graphic Tech in Fullerton, California. While not announcing the price paid separately for each company, Orora did reveal that the combined price was $54 million which represents a multiple of 5.8 times trailing EBITDA. In what appears to be an Orora transaction signature bonus payment, the sellers were reimbursed an additional $5 million for recent capital investments, bringing the effective multiple paid to 6.3 times EBITDA.

Orora has ignited interest and established a valuation benchmark in the retail display and point-of-purchase segment, having only last month acquired Register Print Group in New Jersey at 6.2 times EBITDA including reimbursed capex (see The Target Report – January 2017). These recent acquisitions are in addition to the beachhead Orora established in March 2016, entering the US display printing segment with the acquisition of Dallas-based IntegraColor at a multiple of 6.9 times trailing EBITDA.

The stepped-up acquisition activity in the retail display market over the past year began in earnest in January 2016 when Oak Hill Partners acquired Imagine! Print Solutions which reported revenues in excess of $303 million. (for more about the market for companies in the POP printing segment, see The Target Report – January 2016).

In the more generalized commercial printing segment, Henry Wurst, a $70 million printing company in Kansas City, reached across to the other side of Missouri and acquired St. Louis-based Universal Printing Company which most recently reported $40 million in sales. Production will be consolidated in the Kansas City location, with some sales and client services remaining in St. Louis. Universal had previously announced its sale to Consolidated Graphics (CGX) back in June 2013 but was left at the alter in an unconsummated deal when CGX was itself acquired by RR Donnelley in October of the same year.

Packaging

Jansy Packaging, a design and outsource production agency headquartered in Fort Lee, New Jersey, with backing from Eureka Growth Capital, acquired Cogent Partners, which offers similar services out of its Pomona, California location. Both companies provide global sourcing of package manufacturing. Cogent’s headquarters located in the Dongguan manufacturing region of China strengthen the merged company’s outsourcing value proposition.

MPI Label Systems announced the acquisition of Label Gallery, a flexo and digital label printer located in Norwich, New York. The Ohio-based consolidator now has 11 plants located in 9 states, with over 500 employees. New Jersey-based Quality Packaging Specialists International (QPSI) acquired International Labs located in St. Petersburg, Florida. Both buyer and seller specialize in packaging for the pharmaceutical industry.

Morgan Stanley Capital acquired Fisher Container, a manufacturer of shrink packaging and bags. In a relatively upbeat market for corrugated packaging (see The Box is in Demand, The Target Report – October 2015), Kapstone Paper & Packaging acquired Associated Packaging, a producer of corrugated boxes, point-of-purchase displays and specialty packaging.



2017 February - 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
Releases
Go Modern
(Div. Advisors Excel)
No Data Topeka, KS More Than Banners No Data Topeka, KS 2/25/17 No Data Acquisition Wide format printing Link
Jansy Packaging
(Port co. Eureka Growth Capital)
No Data Fort Lee, NJ Cogent Partners No Data Pomona, CA 2/22/17 No Data Acquisition Packaging design & outsource Link
Orora $2,986 Hawthorn,
Australia
Graphic Tech No Data Fullerton, CA 2/15/17 No Data Acquisition Retail display Link
Orora $2,986 Hawthorn,
Australia
Garvey Group No Data Niles, IL 2/15/17 No Data Acquisition Retail display & packaging Link
Express Image No Data St. Paul, MN SourceOne Graphics No Data Spring Lake Park, MN 2/14/17 No Data Acquisition Wide format printing Link
Superior Packaging & Finishing No Data Braintree, MA Graphic Arts Finishers No Data Charlestown, MA 2/13/17 No Data Acquisition Trade bindery services Link
Deluxe $1,850 Shoreview, MN RDM $21.2 Waterloo, Ontario 2/13/17 $52.5 Acquisition Financial processing systems Link
Henry Wurst $70.6 Kansas City, MO Universal Printing $40.0 St. Louis, MO 2/10/17 No Data Acquisition
(New Direction)
Commercial printing Link
MPI Label Systems No Data Sebring, OH Label Gallery No Data Norwich, NY 2/8/17 No Data Acquisition Label printing Link
QPSI No Data Burlington, NJ International Labs No Data St. Petersburg, FL 2/7/17 No Data Acquisition Pharmaceutical packaging Link
Bigname Commerce
( Port co. TZP Group)
No Data Amityville, NY Folders.com No Data Mount Jackson, VA 2/7/17 No Data Acquisition Presentation products Link
ICON Digital Productions $37.0 Markham, ON Toronto Trade Printers No Data Markham, ON 2/6/17 No Data Acquisition Commercial printing Link
Morgan Stanley Capital No Data New York, NY Fisher Container No Data Buffalo Grove, IL 2/3/17 No Data Acquisition Shrink packaging & bags Link
AlphaGraphics North Austin
(Franchisee)
No Data Austin, TX AlphaGraphics Midtown No Data Austin, TX 2/2/17 No Data Acquisition Printing & copying Link
Electronics for Imaging (EFI) $922.1 Foster City, CA FreeFlow Print Server business
(Div. Xerox)
No Data Norwalk, CT 2/2/17 $22.0 Acquisition Digital front end servers Link
Kapstone Paper & Packaging $3,080 Northbrook, IL  Associated Packaging No Data Greer, SC 2/1/17 No Data Acquisition Corrugated packaging Link


2017 February - 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:
M.O.R. Printing, Inc. 2/8/17 No Data 17-11570 Fort Lauderdale, FL  11th Southern FL
Fort Lauderdale
John K. Olson Chad T. Van Horn Commercial printing
Chapter 7 Filings:
Hauser Printing Company Incorporated
aka Garrity Print Solutions
2/23/17 No Data 17-10409 New Orleans, LA 5th Eastern LA
New Orleans
Elizabeth W. Magner Tristan E. Manthey  Commercial printing
McBattas Packaging & Printing, Inc 2/17/17 No Data 17-40203 Fairbury, NE 8th Nebraska
Fargo, ND
Shon Hastings David P. Lepant  Commercial printing & folding cartons


2017 February - 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
Gannett - Printing facility Jun-17 No Data Freehold, NJ Gannett McLean, VA 2/16/17 Consolidating print in Rockaway, NJ Link
Graphic Communications 3/23/17 No Data Upper Marlboro, MD None N/A Feb-17 Commercial printing Link
World Wide Lines Mar-17 No Data Covington, TN None N/A Feb-17 Screen and dye-sub printing Link
Sunshine Graphics 3/15/17 No Data Miami, FL None N/A Feb-17 Commercial printing Link

Tuesday, February 7, 2017

WestRock Affirms Commitment to Paper – January 2017 M&A Activity


WestRock, the entity created by the merger of RockTenn and MeadWestvaco, enters the new year with a loud and clear affirmation of the company’s commitment to paper-based packaging. In a one-two punch, the company exited the plastic closures and dispensers and landed a solid strategic blow to competitors in the folding carton segment. The company shed its $556 million Home, Health and Beauty business unit in a sale to Silgan Holdings. The divested unit engineers and manufactures triggers, pumps, sprayers and dispensing closure units. Silgan, the acquiring company, manufactures rigid metal and plastic containers as well as the closures and lids. The very next day WestRock acquired Multi Packaging Solutions, the $1.6 billion roll-up of folding carton and high-end packaging companies. 

The acquisition of Multi Packaging Solutions adds considerable depth to WestRock’s strength in the folding carton segment where it already operates vertically, making paper in its paperboard mills, offering design, technical assistance, prepress, and printing to global consumer product companies. The acquired company, established in 2005, private equity-backed Multi Packaging Solutions (MPS) has grown through consistent strategic acquisitions of folding carton, label, packaging design, specialty rigid boxes, gift card; acquiring companies that deliver high-end packaging solutions to the consumer products, personal care and healthcare markets where attractive branding matters. This focused growth strategy paid off when WestRock came calling and offered a price equal to 9.6 times trailing twelve-month adjusted EBITDA.

Wait a minute – did we just say a multiple of 9.6x on TTM? How does what is essentially a printing company achieve an exit multiple approaching double digits when many printers are offered (and accepting) a purchase price of 4.0 times trailing adjusted EBITDA. The key driver of the price paid was very likely the strategic fit that MPS represented for WestRock; simply put there are not many billion-dollar-plus companies in the folding carton segment available for acquisition. When the buyer is as big as WestRock ($14+ billion), it takes a sizable acquisition to move the needle; WestRock was clearly a highly-motivated buyer that was seeking to continue its growth through acquisition. The seller, MPS, was itself a very active acquirer, having recently completed two acquisitions (see The Target Report – November 2016), maintaining its own steady strategic course while showing a very respectable adjusted EBITDA of 14.8%. On the buyer’s side, WestRock enjoys the higher multiple that being a public company endows on successful companies, affording access to capital and the ability to pay more for acquisitions. Commenting on the high multiple it paid, WestRock reported that it expects synergies, savings and improvements that will lower the effective multiple to 7.1 times, but of course that’s speculative and accrues to the buyer only if achieved, while the seller knows they exited at a cool 9.6x multiple.

Commercial Printing – Diversified Services

Pat Patterson, CEO of direct mail and specialty envelope printer Colortree Group, acquired the company he has managed under the ownership of Boathouse Capital since it acquired his company Graphic Innovations in 2011, merging it at that time with another printing company to form the Colortree Group. Boathouse bolted-on a third printing company, Direct Impressions, in 2013, creating the current configuration (see The Target Report – January 2013).

In another successful exit from the printing industry for private equity, Bradford Equities sold Independent Printing of DePere, Wisconsin to trade-only printing company Ennis. The Texas-based Ennis sells exclusively through its distributor network and has executed a disciplined acquisition strategy of adding companies that print products in defined product categories such as bank checks or business forms. With 55 locations across 20 states, Ennis, which reported $544 million revenue, has appeared nine times in our deal logs over the past five and half years. In every transaction, Ennis has executed on its product-focused strategy by acquiring specialty printers: forms (five times), presentation folders, envelopes, tags, labels and promotional products. Independent fits right into the Ennis strategy with defined product offerings including forms, folders and presentation products.

OneTouchPoint, arguably the most viable candidate on the horizon to become the new national roll-up company in today’s commercial printing industry, announced the acquisition of Colorado-based FuseCreates, a commercial printing company that brings additional services, such as mailing, fulfillment, creative and data management to the existing operation in Denver. OneTouchPoint was acquired by private equity firm ICV Partners in 2014 with prior backing from Huron Capital Partners (see The Roll-Up Returns (to Commercial Printing), The Target Report, Sept 2014). The company appears to be accelerating its acquisition activity, having just acquired Cincinnati-based Print Management in November 2016.

Data Communications Management (DCM), based in Brampton, Ontario, announced a double-header with two simultaneous acquisitions, the smaller of which was Thistle Printing, paying $6.1 million for the $16.4 million commercial printer, a ratio of 37% of annual revenue (EBITDA was not disclosed). Announced at the same time, DCM paid $8.8 million for the $21.3 million retail display printing company Eclipse Color & Imaging, a slightly higher ratio of 41% times revenue. Back in the US market, where the market for retail display printing companies has been very robust of late, ColorDynamics of Allen, Texas acquired Superior Graphics, a retail display printing company in Dallas.

Bankruptcies and plant closures spiked up a bit in January, with two Ch. 7 liquidations, four Ch. 11 filings, and five non-bankruptcy closures. None of the bankruptcies filed were by major players and thus the spike may just be a clearing out of some weaker companies as the new year unfolds. One plant closure, however, struck a personal chord; the announcement that Cenveo was closing its Portland plant, formerly The Graphic Arts Center, a super-high-end printer known nationally for printing beautiful annual reports, automotive brochures and fashion catalogs. During the decade before the company was acquired by Cenveo’s predecessor company Mail-Well, I was working for a fine commercial printing company as a sales rep, later as VP of sales and finally as a company owner. On the rare occasion that we were up against The Graphic Arts Center, we knew that in that instance we were not competing on price; we were, at least for the moment, playing in the printing big leagues. They were that good.



2017 January - 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
Releases
Rosebud Media No Data Montreal, QC
Southern Oregon Media Group
(Div. New Media Investment Group)
No Data New York, NY 1/31/17 $15.0 Acquisition Community newspapers Link
New Media Investment Group $1,260 New York, NY
Publishing Division
(Div. Wooster Republican Printing)
No Data Wooster, OH 1/31/17 $21.2 Acquisition Community newspapers Link
Data Communications Mngt. $291.2 Brampton, ON Eclipse Color & Imaging $21.3 Burlington, ON 1/31/17 $8.8 Acquisition Retail display printing Link
Data Communications Mngt. $291.2 Brampton, ON Thistle Printing $16.4 Toronto, ON 1/31/17 $6.1 Acquisition Commercial printing Link
Ennis $544.6 Midlothian, TX  Independent Printing
(Port co. Bradford Equities)
$37.0 DePere, WI 1/30/17 $17.7 Acquisition Folders & forms Link
Baldwin Technology
(Port Co. Forsyth Capital)
$103.7 St. Louis, MO Air Motion Systems No Data River Falls, WI 1/24/17 No Data Acquisition LED UV curing systems Link
ColorDynamics No Data Allen, TX Superior Graphics No Data Dallas, TX 1/24/17 No Data Acquisition Retail display printing Link
WestRock $14,150 Norcross, GA Multi Packaging Solutions
(Port co. Madison Dearborn)
$1,600 New York, NY 1/24/17 $2,280 Acquisition Packaging, folding cartons Link
Silgan Holdings $3,610 Stamford, CT Specialty packaging business
(Div. WestRock)
$556
$14,150
Norcross, GA 1/23/17 $1,025 Acquisition Closures/Dispensing systems Link
Hearst $10,700 New York, NY The Pioneer Group No Data Big Rapids, MI 1/23/17 No Data Acquisition Community newspapers Link
Tracy Press
(Div Tank Town Media)
No Data Tracy, CA Champion Newspapers No Data Chino, CA 1/20/17 No Data Acquisition Community newspapers Link
Lindenmeyr Munroe
(Div. Central National Gottesman)
$5,500 Purchase, NY KFI Technnology No Data Trenton, NJ 1/19/17 No Data Acquisition Wide format distributor Link
Ricoh $18,040 Tokyo, Japan Avanti No Data Toronto, ON 1/17/17 No Data Acquisition MIS system for printing Link
Colortree Group Mngt Team No Data Richmond, VA Colortree
(Port Co. Boathouse Capital)
No Data Richmond, VA 1/17/17 No Data Acquisition Direct mail printing Link
Nekoosa Coated Products
(Port co. Wingate Partners)
No Data Nekoosa, WI ClingZ No Data Rancho, NM 1/11/17 No Data Acquisition Specialty substrates Link
OneTouchPoint
(Port Co. ICV Partners)
$150 Hartland, WI FuseCreates No Data Denver, CO 1/10/17 No Data Acquisition Commercial printing Link
Deluxe $1,850 Shoreview, MN FMCG Direct $80.0 New York, NY 1/6/17 $200.0 Acquisition
(AGC Partners)
Direct mail marketing Link
Fortis Solutions Group No Data Virginia Beach, VA Action Packaging Systems No Data Ellington, CT 1/4/17 No Data Acquisition Label printing Link
Platinum Equity No Data Beverly Hills, CA Valpak - Cox Target Media No Data St. Petersburg, FL 1/3/17 No Data Acquisition
(Goldman, Sachs)
Direct mail programs Link
Bell and Howell
(Port Co. Versa Capital Mngt.)
No Data Research Triangle Park, NC Sensible Technologies No Data Livonia, MI 1/3/17 No Data Acquisition Mailing services equipment Link


2017 January - 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:
Artful Color, Inc. 1/19/17 No Data 17-00286 Wake, NC 4th Eastern NC
Raleigh
Stephani W.
Humrickhouse
Travis Sasser  Display & art (giclĂ©e) prints
Media Marketing Research, Inc 1/18/17 No Data 17-40204 Long Island City, NY 2nd Eastern NY
Brooklyn
Carla E. Craig Stephen Z. Starr  Newspaper & magazine distribution
ColorSciences LLC 1/18/17 No Data 17-10067 Austin, TX 5th Western TX
Austin
Tony M. Davis Pro Se Color management systems
Color Resources Center, Inc. 1/11/17 No Data 17-10057 New York, NY 2nd Southern NY
New York
James L. Garrity, Jr.   Julie Cvek Curley Retail display & wide format printing
Chapter 7 Filings:
Pure Exhibits 1/19/17 No Data 17-01593 Oak Lawn, IL 7th Northern IL
Chicago
Donald R. Cassling John R. Hiltz Trade show exhibits
Miami Valley Publishing LLC 1/18/17 No Data 17-30150 Fairborn, OH 6th Southern OH
Dayton
Lawrence S. Walter Pro Se Commercial printing


2017 January - 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
Cenveo - Printing plant 3/31/17 No Data Portland, OR Cenveo Stamford, CT Jan-17 Commercial printing
Formerly The Graphic Arts Center
Link
Abco Printing  1/24/17 No Data Windsor, NJ None N/A Jan-17 Commercial printing Link
LSC Communications Mar-17 No Data Gallatin, TN LSC Communications Chicago, IL Jan-17 Catalogs & magazine Link
Imprimerie Doublimage 2/22/17 No Data Mascouche, QC None N/A Jan-17 Book printing Link
Shreve Printing 3/3/17 No Data Shreve, OH None N/A Jan-17 Commercial printing Link