Saturday, December 7, 2024

On-Demand Print & Merch is BIG Business for Private Equity – November 2024 M&A Activity


The future of print will increasingly be individually customized with the images we want, delivered wherever we want, printed on demand when we want, and applied to whatever products we choose  – The Target Report, May 2021.

This inexorable trend has accelerated in the Covid and post-Covid periods. Initially, social distancing and the ease of online ordering was a factor, as was the desire to spruce up our personal at-home spaces with personalized décor. Going online first to order unique items is now often the go-to first response, picking up the phone and engaging in personal interaction a comparative nuisance. Ordering many types of printed items is no exception.

Building a robust and efficient online system has increasingly been accomplished with the support of well-heeled private equity funds seeking the higher margins possible with the scale and automation obtainable in an online environment. 

Two Online Print Businesses Merge, Different Models Remain 

Printful and Printify announced on November 5th that the companies will merge in what is being billed as a merger of equals. By the 20th of the month, the shareholders and regulatory authorities had indicated final approval of the transaction, and the new executive team positions were announced. The Printful CEO will be the new CEO of the merged company, taking the top position, while the Printify CEO is now the President and Head of Platform. The two brands will continue to operate separately, at least for now, with the name of the holding company still undetermined.

Both companies are providing what is known as white-label services to hundreds of thousands of independent resellers of on-demand printed products. In a white-label business, the manufacturer produces products that can be sold under the reseller’s brand. Designers offer unique products under their own name, logo, and brand identity, never revealing that the product was made by others. With the white-label strategy, the two sites support a thriving network of online designers and retailers, many of which self-identify as being part of the “Print-On-Demand Community.”

When the merger was announced, the influencers on YouTube that act as self-appointed print-on-demand consultants were all in a dither about the merger, but they quickly coalesced in a near unanimous and positive opinion that the merger was good for the Community.

There are several major categories that are the primary driver of revenue on both systems. Apparel is the number one featured category. Personalization is available on a multitude of wearable items, from the expected tee shirts, hoodies, hats, and jackets, to more unique items such as swim trunks and sports bras, all of which can be individualized with print. Other categories include home and office décor, drinkware, stationery, and customized gift items. The merged company can now offer in excess of one thousand distinct products. 

Theirs is a tale of two business models that are fundamentally different. Printful, founded in 2013, is an online print-on-demand service that owns and manages its production facilities, and with fulfillment centers in North America and Europe. Printing technology utilized by Printful in its manufacturing sites includes Kornit Digital fabric printers and the Coloreel embroidery system (For more on Coloreel, see: The Target Report: Troubled Times for Graphic Machinery Innovators – July 2024.)

On the other hand, Printify, founded in 2015, is purely a technology company that acts as an intermediary, connecting its creator community to 85 third-party pre-qualified suppliers. Based on this asset-light model, Printify is able to offer a much broader product range and wider geographic footprint, including manufacturing partners in China, Australia, the US, and multiple countries in Europe. If you want to offer customized dog collars, Printify is the way to go. 

As one Reddit user put it: “Printful makes stuff. Printify lists products made by different manufacturers.” In both cases, the companies have prospered by serving the print-on-demand community in the new diversified universe of design-driven retailers, sometimes dubbed the “creator economy.” 

Institutional Investors Provided the Capital to Fuel the Growth

In May of 2021, Bregal Sagemount, a private equity fund based in New York City, invested $130 million in Printful. Based on the percentage of equity acquired, the investment implied that the enterprise value of Printful exceeded $1 billion, giving the company the right to claim “unicorn” status, a first for any company that was originally based in Latvia (see The Target Report: On Demand Everything – May 2021). 

Printify, also originally based in Latvia, obtained a $45 million venture capital investment from Index Ventures, among other early investors, to fund the company’s growth during its startup phase. In a heartfelt congratulatory posting, a principal investor at Index Ventures has this to say about the merger: “While the two companies share cultural DNA, their journeys affirm that there’s no single blueprint for building a high-growth startup. Their different paths – one building manufacturing capacity, the other a marketplace; one expanding to the US early, the other doubling down on European talent – prove that companies can take different routes to the same summit.” 

Reading between the lines, TechCrunch, a technology news website, opined that the recent announcement “underscores the struggles that startups in the on-demand manufacturing space, and the creator economy, are facing as stand-alone companies. Funding for later-stage startups has been especially challenging in Europe over the last several years, and it looks like 2025 will be no exception.” With that understanding as a backdrop, we can see that the use of a merger transaction enables these two companies that serve a common market to build scale without the need for an extensive recapitalization or sale to a bigger private equity firm in a secondary buyout. At least not yet. 

The Money is Betting on Print On Demand


Over the past five years, we have identified 315 investments by private equity funds in companies in the printing, packaging, and related industries. While the number of investments in print-on-demand businesses is a sliver of the total, in the world of online print these transactions are significant. These investments provide the capital needed to scale, automate, and transform print business models. Investors are keen on businesses that harness digital solutions to streamline order intake, optimize production, and enhance customer experience.

Customizable product platforms like those offered by Printful and Printify have set new benchmarks for ease of use, increased the variety of printable items offered, and enabled the ability to personalize at the level of one. Private equity firms are investing in companies that can offer these services at scale, and that hold out the promise for future growth. While the two companies featured in our commentary this month principally print on apparel and promotional items, the same dynamics are at play in the commercial printing market segment with companies such as Digital Room and Circle Graphics. Traditional printing companies that ignore these trends risk obsolescence and increased competitive pressure from online printing companies of all sorts.
   
2024 November - Mergers and Acquisitions in the Printing, Packaging, Paper & Related Industries

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

Party #1 Address

Deal Party #2		 Pre-Deal
Revenue
(US$Mil)

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

Notes		 Link
Sunset Printing No Data Wharton, NJ Artcraft - Print business No Data North Attleboro, MA 11/30/24 No Data Asset Acquisition
(Graphic Arts Advisors)		 Print & brand management Link
CFS No Data Norton, MA Artcraft - Promo business No Data North Attleboro, MA 11/30/24 No Data Asset Acquisition
(Graphic Arts Advisors)		 Promo management Link
Digital Color Concepts
(Port co. Sherburne Partners)		 No Data Mountainside, NJ TigerPress No Data East Longmeadow,
MA		 11/26/24 No Data Acquisition Commercial & folding cartons Link
Multi-Color Corporation
(Port co. Clayton, Dubilier & Rice)		 $3,000 Rosemont, IL Starport Technologies No Data Kansas City, MO 11/21/24 No Data Acquisition RFID tag production Link
River Associates Investments No Data Chattanooga, TN ID Label No Data Lake Villa, IL 11/15/24 No Data Acquisition Barcode labels & asset tags Link
Package Design & Supply
(Port co. Fairchild Capital Partners)		 No Data Buffalo, NY True North Packaging No Data Rochester, NY 11/14/24 No Data Acquisition Corrugated boxes Link
X-Rite No Data Grand Rapids, MI Colorware No Data Amsterdam
The Netherlands		 11/14/24 No Data Acquisition Color measurement software Link
TentCraft No Data Traverse City, MI World Class Displays No Data Cedar Rapids, IA 11/8/24 No Data Acquisition
(Benchmark Int'l)		 Trade show displays Link
Minuteman Press -
Grand Blanc		 No Data Grand Blanc, MI Kendall Printing No Data Flint, MI 11/7/24 No Data Acquisition Printing & copying Link
Labelink No Data Anjou, QC International Label & Printing No Data Elk Grove Village, IL  11/7/24 No Data Acquisition Label printing Link
Proforma Printhouse $4.0 Kalamazoo, MI Proforma Marketplace No Data Roseville, MI 11/6/24 No Data Acquisition Print & promo management Link
Clampitt Paper No Data Dallas, TX Colorado Envelops No Data Broomfield, CO 11/6/24 No Data Acquisition Envelope manufacturing Link
Aterian Investment Partners No Data New York, NY Outlook Group
(Port co. Heartwood Partners)		 $94.8 Neenah, WI 11/6/24 No Data Acquisition Labels, flexible, folding cartons Link
DMM Direct
(Affil. PDF Print Communications)		 $32.5 Signal Hill, CA Direct Mail of Maine No Data Scarborough, ME 11/5/24 No Data Asset Acquisition
(Graphic Arts Advisors)		 Direct mail printing Link
Printful
(Port co. Bregal Sagemount)		 No Data Charlotte, NC Printify No Data Wilmington, NC 11/5/24 No Data Merger On-demand products Link
Veritiv
(Port co. Clayton, Dubilier & Rice)		 No Data Atlanta, GA PAX Global $45.0 Naperville, IL 11/4/24 No Data Acquisition Specialty packaging Link
Domtar $7,059 Fort Mill, SC Iconex Paper
(Port co. Atlas Holdings)		 No Data Atlanta, GA 11/4/24 No Data Acquisition Thermal receipt paper Link
Data Communications Management $493.7 Brampton, ON Zavy Limited No Data Auckland,
New Zealand		 11/4/24 No Data Acquisition Social media marketing Link
SBPI Graphics No Data Earth City, MO Kopytek / Print it Big No Data Earth City, MO 11/1/24 No Data Acquisition Wide format printing Link
Kirkwood $67.0 Wilmington, MA Jet Mail Services No Data Hudson, MA 11/1/24 No Data Acquisition Mailing services Link
INX Group Limited
(Div. Sakata INX)		 No Data Schaumburg, IL Coatings & Adhesives No Data Leland, NC 11/1/24 No Data Acquisition Coatings & adhesives Link

  
2024 November - Bankruptcy Filings in the Printing, Packaging, Paper & Related Industries



Filing Party
Date
Case
Filed		 Pre-Petition
Revenue
(US$Mil)


Case #


Filing Party Address


Circuit


Region & City


Judge


Attorney for Debtor


Notes
Chapter 11 Filings:
SGZ Group, Inc., dba Kendall Press 11/20/24 No Data 24-12330
Sub Ch. V		 Chelsea, MA 1st Massachusetts
Boston		 Janet E. Bostwick David B. Madoff Commercial printing
Chapter 7 Filings:
No Chapter 7 Filings Found this Month --- --- --- --- --- --- --- --- ---

  
2024 November - Non-Bankruptcy Closures in the Printing, Packaging, Paper & Related Industries



Closed Company / Facility
Date of Closure		 Pre-Closure
Revenue
(US$Mil)


Closing Address		 Related Party Related Party
Address		 Date Closure Public


Notes
Press
Releases
The Artcraft Company
(Fiduciary Agent: Graphic Arts Advisors)		 11/19/24 No Data North Attleboro, MA None N/A Nov-24 Engraving, wide format, & promo Link
Gannett - Printing facility Mar-25 No Data Providence, RI Gannett McLean, VA Nov-24 Consolidating print to other plants Link
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Thursday, November 7, 2024

Paper Industry Transformation Moves Forward – October 2024 M&A Activity


It didn’t take long. The ink was hardly dry. International Paper’s shareholders had just approved its acquisition of DS Smith, the UK-based manufacturer of corrugated case materials and related fiber-based products. Only days before, DS Smith had obtained its own shareholders’ approval to proceed with the deal. Within the following week, International Paper announced the closure of no fewer than six facilities, spread out from North Carolina to Texas, mostly in the corrugated box segment. The job of rationalizing the total combined production capacity of the merged operations was clearly underway in advance of the deal’s consummation. Unlike many plant closures in the paper manufacturing industry, we view these changes as a signal that the demand for corrugated packaging products will remain strong. Consequently, International Paper is positioning itself as a leading global player in the segment. (For more, see: The Target Report: Paper Manufacturers Shift Grades – April 2024.)

International Paper Gets Lean Before Merger with DS Smith

Five months into the job, new Chairman & CEO Andrew Silvernail continues to shake up things at International Paper as restructuring, cost cutting and workforce reductions continue. The mega US-based pulp and paper company seeks to expand its European presence, cementing its position as the world’s largest paper giant (by revenue) at a time of consolidation in the paper industry. Fiscal-year revenues are expected to exceed $18.8 billion for 2024. When combined with DS Smith, International Paper’s pro-forma annual revenues are projected to be approximately $28.2 billion, with 90% of sales coming from corrugated products.

International Paper is permanently shutting down facilities in six states: two packaging plants in Rockford, Illinois, and Kansas City, Missouri, respectively; two corrugated container plants, one in Statesville, North Carolina, and the other in Cleveland, Tennessee; one corrugated sheet feeder plant in San Antonio, Texas; and a cellulose pulp mill in Georgetown, South Carolina. The combined result of the recently announced mill closures is an expected $230 million improvement in adjusted earnings.

Additionally, some 400 people at its Memphis headquarters are being let go. In all, 989 employees face being without their jobs by mid-December – that number represents about 2.5% of the company’s workers in 35 states and 10 countries worldwide. These moves follow another 900 layoffs announced 13 months ago, when a containerboard mill in Texas was closed and two pulp machines (one North Carolina and the other in Florida) were retired.

No More Fluff?

At the end of October, International Paper announced that it is reviewing strategic options for its global cellulose fibers (GCF) business. The company plans to shutter the aforementioned South Carolina mill by year’s end. The Georgetown, South Carolina, facility produces approximately 300,000 tons of high-quality absorbent pulp, often called “fluff” pulp, designed for a range of consumer applications, from baby diapers and incontinence pads to feminine hygiene products. The specialty pulp is also used as a sustainable raw material used in textiles, construction materials, paints and coatings.

International Paper plans to replace 100% of the mill's fluff pulp capacity by transferring production to other sites. Overall, the GCF business generated $2.9 billion in revenue for International Paper in 2023, and has operations in three countries, with eight mills and two converting facilities.

However, International Paper announced that it is reviewing the strategic options for its GCF business, leading us to believe that it may be spun off. On International Paper’s Q3 earnings call with investors, CEO Silvernail hinted at a harbinger of additional changes to come, previewing plans to reinvest some recent cost savings into new greenfield or brownfield box plants. He revealed the company had “multiple opportunities” to do this and will share more details in 2025.

The Georgetown mill that is closing also produces uncoated freesheet papers that it sells to Sylvamo. Production of non-packaging grades for Sylvamo will end December 31, 2024 when the mill closes. Sylvamo itself was formerly the printing papers division of International Paper, and is the maker of primarily uncoated grades, including the well-known brands Accent, Hammermill, Williamsburg, and white-labeled papers for HP. Sylvamo was spun off in October 2021 and cleaved off approximately $4 billion of revenue and 6,500 employees.

It appears that International Paper will double-down and increase its box and board manufacturing operations. That strategic direction is consistent with the report released in October by Precedence Statistics, which projects that the global corrugated box market will grow at a compound annual growth rate of 5.14% over the next decade. International Paper’s spinoff, closures and purchase of DS Smith are consistent with the overall industry movement we have observed in which mill closures and conversions trend away from printing paper grades, and in favor of packaging grades. (For more, see: The Target Report: Paper Industry in Transition – May 2022.)

Printing Plants Close

October was a high-water mark in our reporting on non-bankruptcy closings, exceeding, in number, every month since we began tracking these closures in 2012. In addition to the aforementioned closures by International Paper, several major printing operations will be shutting down.

Quad, the publicly-traded printing company based in Sussex, Wisconsin, announced it is shutting down its 120,000 square-foot plant in Waukee, Iowa. The plant came into the Quad family via the acquisition of Worldcolor in 2010, and primarily prints directories which have been in secular decline ever since the advent of internet-based online data sources. In October, Quad also announced the sale of most of its European operations to private equity firm Capmont. Joel Quadracci, Chairman, President and CEO of Quad, explained that “the decision to divest the majority of our European operations supports our ongoing strategic focus to optimize our business portfolio for growth as a marketing experience company.” However, Quadracci made clear that print will still be a major business for Quad in the near future, stating “we will maintain state-of-the-art printing operations in locations that best support our ever-evolving MX offering.”

Kodi Collective, the former division of LSC Communications recently acquired by the CJK Group, announced that it would be closing its plant in Danville, Kentucky. The plant produced magazines and catalogs. As run lengths in these segments have decreased, CJK noted that the company will have capacity at its other facilities in Kentucky, Illinois, and Missouri to absorb the work formerly produced at the Danville site. CJK has previously staked out positions upstream and downstream from print. The company made another move that is additive to its core print offerings with its acquisition of Accucoms International. The acquired company, based in the Netherlands, operates globally and provides sales and marketing services to academic and professional publishers. Accucoms will be integrated into CJK’s KnowledgeWorks Global division. (For more, see: The Target Report: CJK Goes Global as Cenveo Unwinds – September 2020.)

SG360°, a portfolio company of private equity firm ICV Partners since 2016, is closing its Broadview, Illinois plant. The direct mail facility was acquired by SG360° with its acquisition of Lehigh Direct in 2014. Earlier this year, the company announced that it would be consolidating its web offset printing operations and increasing its investment in its digital print capacity. The company noted that despite the downsizing, its corporate headquarters in Wheeling, Illinois will be the home of thirteen inline web presses, still a formidable production platform for high-volume direct mail.

Other reported closures included two newspaper printing plants, the St. Louis Post-Dispatch printing facility, owned by Lee Enterprises, and the Star-Ledger printing facility in Montville, New Jersey, a publication of NJ Advance Media. The St. Louis Post-Dispatch will, for now, continue to produce a printed edition on a seven-day schedule, which will be printed at the Columbia Press, owned by Gannett, Lee’s rival in the newspaper publishing business. The New Jersey papers will not fare as well, at least not in printed form, as the plant closure is the death knell for the printed edition of the Star-Ledger, as well as three other New Jersey regional papers. The New Jersey papers, including the Star-Ledger which has been highly acclaimed for its investigative reporting, are moving to an entirely online publishing model.

Each of these printing plant closures is indicative of the inexorable trend: content that can move online will move online. As a result, paper manufacturers will continue to shift away from printing and newsprint paper production and focus on packaging grades.


2024 October - Mergers and Acquisitions in the Printing, Packaging, Paper & Related Industries

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

Party #1 Address

Deal Party #2		 Pre-Deal
Revenue
(US$Mil)

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

Notes		 Link
Graphic Village
(Port co. Revitalize Capital)		 $35.7 Cincinnati, OH AAA Laminating & Bindery No Data Fairfield, OH 10/31/24 No Data Acquisition Bindery & finishing services Link
Hood Packaging No Data Atlanta, GA Industrial packaging operations
(Div. TC Transcontinental)		 $50.0 Thomasville, NC 10/28/24 $95.0 Acquisition Industrial packaging Link
Carpenter Media Group No Data Natchez, MS EO Media Group (15 titles) No Data Salem, OR 10/23/24 No Data Acquisition
(Dirks, Van Essen)		 Community newspaper Link
Shaw Media No Data Dixon, IL Daily Journal No Data Kankakee, IL 10/23/24 No Data Acquisition
(Dirks, Van Essen)		 Community newspaper Link
Capmont No Data Munich, Germany European Operations
(Quad subsidiaries)		 No Data Sussex, WI 10/22/24 $45.0 Acquisition Diversified print & marketing Link
Mittera $572.4 Des Moines, IA Rex3 No Data Sunrise, FL 10/18/24 No Data Acquisition Commercial printing Link
Foundation Investment Partners No Data Chagrin Falls, OH American Spool & Packaging No Data Hartsville, SC 10/15/24 No Data Acquisition Folding cartons & specialties Link
SupplyOne
(Port co. Wellspring Capital)		 No Data Newtown Square,
PA		 Gulf Packaging No Data Bay Minette, AL 10/9/24 No Data Acquisition Corrugated boxes Link
CJK Group No Data Brainerd, MN Accucoms No Data Den Haag, Netherlands 10/8/24 No Data Acquisition Publishing marketing services Link
Minuteman Press, Columbia
(New franchisee)		 No Data Columbia, SC Apexgraphix No Data Columbia, SC 10/7/24 No Data Acquisition Printing & copying Link
Multi-Color Corporation
(Port co. Clayton, Dubilier & Rice)		 No Data Cincinnati, OH Starport Technologies No Data Kansas City, MO 10/4/24 No Data Acquisition RFID label manufacturing Link
Oak Street Ventures No Data Sheridan, AR J.M. Fry Printing Inks No Data Henrico, VA 10/2/24 No Data Acquisition Printing inks Link
Antalis
(Sub. KPP Group Holdings)		 No Data Boulogne-Billancourt, France Xerox EMEA paper business
(Div. Xerox)		 No Data Rochester, NY 10/1/24 No Data Acquisition Paper Distribution Link
DigiCopy No Data Steven Point, WI The Print Shop No Data Black River Falls, WI 10/1/24 No Data Acquisition Commercial printing Link
Wise No Data Alpharetta, GA Business forms business
(Div. Victor Printing)		 No Data Sharon, PA 10/1/24 No Data Asset Acquisition Business forms Link


2024 October - Bankruptcy Filings in the Printing, Packaging, Paper & Related Industries



Filing Party
Date
Case
Filed		 Pre-Petition
Revenue
(US$Mil)


Case #


Filing Party Address


Circuit


Region & City


Judge


Attorney for Debtor


Notes
Chapter 11 Filings:
Digital Graphics Plus, LLC 10/4/24 No Data 24-05422 Longwood, FL 11th Middle FL
Orlando		 Grace E. Robson Jeffrey Ainsworth Wide-format & apparel
Chapter 7 Filings:
No Chapter 7 Filings Found this Month --- --- --- --- --- --- --- --- ---

   
2024 October - Non-Bankruptcy Closures in the Printing, Packaging, Paper & Related Industries



Closed Company / Facility
Date of Closure		 Pre-Closure
Revenue
(US$Mil)


Closing Address		 Related Party Related Party
Address		 Date Closure Public


Notes
Press
Releases
International Paper Dec-24 No Data Georgetown, SC International Paper Memphis, TN 10/31/24 Cellulose Pulp mill Link
Quad - Printing facility 1/10/25 No Data Waukee, IL Quad Sussex, WI 10/30/24 Directory printing
(Formerly Worldcolor facility)		 Link
Star-Ledger - Printing facility 2/2/25 No Data Montville, NJ Advance Publications New York, NY 10/30/24 Newspaper printing plant Link
International Paper 12/18/24 No Data Kansas City, MO International Paper Memphis, TN 10/18/24 Corrugated boxes Link
International Paper 12/18/24 No Data Cleveland, TN International Paper Memphis, TN 10/18/24 Corrugated boxes Link
International Paper 12/18/24 No Data Statesville, NC International Paper Memphis, TN 10/18/24 Corrugated boxes Link
International Paper 12/18/24 No Data Rockford, IL International Paper Memphis, TN 10/18/24 Corrugated boxes Link
International Paper 11/18/24 No Data San Antonio, TX International Paper Memphis, TN 10/16/24 Corrugated sheet production Link
St. Louis Post-Dispatch - Printing facility Jan-25 No Data Maryland Heights, MO Lee Enterprises Davenport, IA 10/15/24 Newspaper printing plant Link
Kodi Collective Q4-24 No Data Danville, KY CJK Group Brainerd, MN 10/7/24 Magazine & catalog printing Link
Ocean State Bookbinding 12/5/24 No Data Providence, RI None N/A Oct-24 Book binding services Link
SG360° - Printing facility Q4-24 No Data Broadview, IL SG360°
(Port Co. ICV Partners)		 Wheeling, IL Oct-24 Direct mail Link
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