Friday, April 7, 2023

Blueprint for Convergence – March 2023 M&A Activity


It was the smell that offended. It assaulted your senses. It emanated from the far end of the prep department, in the back, behind the large horizontal camera, by the plate exposure frames. This was not the sweet, almost floral, scent of the isopropyl alcohol evaporating from the fountain solution on the multi-unit offset presses. This was not the pungent, thick, smell of offset inks, nor was this the overwhelming petrochemical odor of the press wash at the end of the day when multiple presses shut down simultaneously.

It was the ammonia that stunk. The smell permeated the prepress ( stripping) department in the early morning when the majority of blueline proofs were made. After exposure and processing, the blueprint paper was washed and laid out to dry, flat, but still never really flat. The strippers glued the bluelines back-to-back to emulate two-sided printing, cut, folded, and stapled the thick, bulky, crinkly blueprint paper to approximate the finished project as closely as possible. The sales reps, myself included, eagerly waited for production to sign off, so we could get on the road to take the blueprint proofs on our daily runs to customers. By the time the proofs were delivered, the smell had mostly lifted and our customers were spared the stench of ammonia-based blueline proofing.

Not long after I began my career in printing, substitute photosensitive papers that did not require obnoxious chemical processing came into widespread use as the proofing paper of choice for offset printers. The nasty ammonia smell was a thing of the past, an early olfactory benefit of the march of technology in our industry.

Reprographers

Traditionally known as blueprinting companies, reprographers are specialized firms that serve the architectural, engineering, and construction management (AEC) industries. Reprographers were called upon to produce copies of architectural and technical drawings. Often times, many sets of multi-sheet copies were needed for all the team members and crews involved in a construction project. As changes were made, new sets were required and rushed to the field. Minimal time elapsed and speedy delivery of the blueprint sets to the field crews was critical. As a result, reprographers often had multiple locations, distributed close to the customers, with delivery service included.

Reprographers were some of the earliest adopters of fully digital workflows, transitioning from analog prints using light and chemicals to wide-format xerographic toner-based devices. Plans and technical drawings are primarily monochrome, well-suited to early black-only xerographic devices. However, the seeds of many reprographers’ decline were planted in that initial transition to digital, as the need for printed copies by AEC customers was greatly reduced by increased electronic transmission and viewing of digitized technical drawings.

For some reprographers, the familiarity with wide-format monochrome printing devices and digital workflows became the foundation upon which to build a more robust business that offered a wide variety of services to a diverse client base. It was a small leap from the digital production of technical drawings to more generalized digital color wide-format printing.

Crisp Imaging in California acquired Advanced Digital Services, the latest in a long list of acquisitions completed by the company. Crisp is an exemplar of the convergence theory in the printing industry: the integration of various printing technologies, digitally connected, enabling print companies to offer a more comprehensive range of services and solutions. Crisp Imaging added five acquisitions in 2022 alone, with a total of eight companies purchased since 2021.

Crisp Imaging was founded in 2001 as a franchise copy shop, but soon thereafter the founders realized that there was a need to serve the AEC market in southern California and they transitioned their shop to an independent company focused on reprographic services. As the needs of the AEC market shifted from printed to digital documents, Crisp expanded its gamut of services to include banners, office wall graphics, tradeshow displays, vinyl lettering, floor graphics, and installation, among other services.

The company still offers wide-format black and white prints on bond and vellum papers, mylar prints, copy services, document scanning; all delivered via a company fleet in true reprographer style. The reprographic corporate DNA also runs deep in the company’s geographic strategy: many locations close to customers, now with twenty-one locations from Seattle to San Diego.

The Blueprint

The blueprint was one of the earliest methods of reproduction that relied on a photochemical reaction. Invented in 1842 by Sir John Herschel, the blueprint process enabled rapid and accurate reproduction of an unlimited number of copies. By the 1890’s, the process had virtually eliminated the expense of lithographic reproduction of architectural and technical drawings and was far less costly and much faster to produce than a hand-traced reproduction.

Originally named the cyanotype, the process is based on a photosensitive paper that has been impregnated with ammonium ferric citrate and then developed with potassium ferricyanide. A negative of the desired image, most often a line drawing on translucent paper, was placed over the treated paper, usually held in place by a sheet of glass in a frame. In Herschel’s time, the necessary exposure to ultraviolet light was obtained by placing the frame outside for a couple minutes under bright sun, or up to ten minutes on a cloudy day. The light-sensitive coating is thereby converted to a blue dye, which is then chemically stabilized. The non-exposed areas are washed away, leaving the white of the paper.

Herschel made numerous contributions to the photographic methods of reproduction and is credited with coining the term photography in 1839. He discovered the process of fixing a photograph, which he applied to his first glass-plate photograph from 1839, and since it was fixed, the photo still exists. (Those of us in the printing business pre-imagesetters and film processors will remember the final stage of producing negatives for offset printing, swishing negatives back and forth in a tray of chemical fixer). Herschel was the first to apply the terms negative and positive to photography, terms which we still use today. He was an early experimenter with concepts of color photography.

As amazing as were his contributions to printing and photography, these were but side interests for Sir Herschel. He originated the use of the Julian day system in astronomy, named seven moons of Saturn and four moons of Uranus, the seventh planet which had been discovered by his father, Sir William Herschel. He contributed to the philosophy of science, wrote several articles for the Encyclopedia Britannica, and was three times the president of the Royal Astronomical Society. He built his own 20-foot reflecting telescope, which he took to South Africa with his family to study the southern skies, and also discovered four galaxies.

While on the Cape of South Africa, Herschel and his wife Margaret produced botanical illustrations of local flora that are still considered reference works today. He wrote numerous papers and articles, and along the way, translated Homer’s Iliad into English. Herschel investigated color blindness and correctly figured out that astigmatism was an irregularity of the cornea.

His buddy Charles Babbage invented the predecessor to the modern computer. Another friend, George Everest, was the Surveyor General of India, for whom the tallest mountain on Earth is named. Sir Herschel speculated on the transition of languages and animal species over long periods of time. He was visited in South Africa by the young naturalist Charles Darwin who would later credit Herschel as an influence on his theory of evolution. The two scientists are buried side-by-side in Westminster Abbey.

I suppose that Sir Herschel would approve of how the modern computer, the descendent of his friend Babbage’s invention, has been integrated with the inkjet flatbed printer, a distant descendent of his own flatbed blueprint process, and evolved into the core of the modern reprographic shop.
   
2023 March - 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
Phase 3 Marketing and Communications $28.9 Atlanta, GA Technology Media Group No Data Dallas, TX 3/28/23 No Data Acquisition Commercial printing & promo Link
Canva Group
(Port co. W Investments)
No Data Laval, QC Canacadre No Data Boucherville, QC 3/28/23 No Data Acquisition Retail display hardware Link
Convergent Print Group
né Vincent Printing
No Data Chattanooga, TN BPGraphics No Data Phoenix, AZ 3/27/23 No Data Merger Wide format printing Link
Crisp Imaging No Data Costa Mesa, CA Advanced Digital Services No Data Livermore, CA 3/27/23 No Data Acquisition Reprographics & wide format Link
eProductivity Software
(Div. Symphony Technology Group)
No Data Fremont, CA Tharsten Group No Data Colne, UK 3/27/23 No Data Acquisition Print MIS software Link
Millcraft Paper No Data Cleveland, OH TNT Papercraft No Data Cincinnati, OH 3/24/23 No Data Acquisition Paper distribution Link
Modern Litho Mngt Team $50.6 Jefferson City, MO Modern Litho $50.6 Jefferson City, MO 3/23/23 No Data Acquisition Commercial printing Link
Kyocera $16,367 Kyoto, Japan NIXKA No Data Aubagne, France 3/22/23 No Data Acquisition Inkjet print systems Link
El Rito Media No Data Española, NM Artesia Daily Press No Data Artesia, NM 3/13/23 No Data Acquisition
(Dirks, Van Essen)
Community newspaper Link
Dentsu Group $9,457 Tokyo, Japan Tag Worldwide Holdings
(Port co. Advent International)
No Data London, UK 3/7/23 No Data Acquisition Marketing production services Link
TC Transcontinental $2,198 Montreal, QC Multifilm Packaging No Data Elgin, IL 3/7/23 No Data Acquisition Flexible packaging Link
Inovar Packaging Group
(Port co. Kelso & Company)
No Data Dallas, TX Amherst Label No Data Milford, NH 3/1/23 No Data Acquisition Label printing Link
BR Printers No Data San Jose, CA JP Graphics No Data Appleton, CA 3/1/23 No Data Acquisition Commercial printing Link
CJK Group $631.0 Brainerd, MN McNaughton & Gunn No Data Saline, MI 3/1/23 No Data Acquisition Book manufacturing Link

   
2023 March - 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:
Nightmare Graphics 3/12/23 No Data 23-11647 Columbia, MD 4th Maryland
Baltimore
Michelle M. Harner Michael Patrick Coyle Screen printing & embroidery
Visionary Labels Packaging, LLC 3/17/23 No Data 23-11032 Fontana, CA 9th Central CA
Riverside
Magdalena Reyes Bordeaux Giovanni Orantes Shrink sleeves & can application
Chapter 7 Filings:
Printforia, Inc 3/14/23 No Data 23-40375 Vancouver, WA  9th Western WA
Tacoma
Mary Jo Heston Faye C. Rasch Ecommerce print-on-demand

   
2023 March - 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
A&M Trade Bindery 4/27/23 No Data Hayward, CA None N/A Mar-23 Bindery services Link
GH Print Consulting 4/20/23 No Data Cicero, IL None N/A Mar-23 Commercial printing Link
Miller Imprints 3/24/23 No Data Newport, KY None N/A Mar-23 Screen Printing Link
Prestige Embossing 3/22/23 No Data Houston, TX None N/A Mar-23 Trade finishing Link

Tuesday, March 7, 2023

Duking it Out in the Label Business – February 2023 M&A Activity


Packaging deals have eclipsed transactions in all other segments of the printing and related industries for the past three years. That shows no sign of letting up. The temporary dominance in transactions that involved box printing companies, as we noted in The Target Report last month, has reverted once again to the norm in which label printing companies are the preferred target. (See The Box is Back – January 2023). The consolidation of the label printing industry is being driven by a slew of private equity firms that have demonstrated a willingness to pay double-digit multiples for profitable label manufacturers of any decent size. The attributes of recurring revenue, customer stickiness due to required brand continuity, and relative de minimis component cost of labels within the scheme of total product cost, all make label printing highly attractive to financial buyers.

The Contenders

Resource Label Group is my choice as the poster child for the PE-backed label industry feeding frenzy. With backing from Ares Management, its third private equity firm sponsor, Resource Label acquired Riverside, California-based Majestic Labels, the digital label printing division of Majestic Printing Systems. Majestic is the 27th acquisition for the Resource Label Group, which began as a single location company in Tennessee in 1991. The company grew organically until 2005 when it entered the private equity ecosystem with financial backing from Lineage Capital. With only one acquisition under its belt, Lineage passed the torch to First Atlantic Capital in 2011. With the backing of First Atlantic, Resource went into hyper-growth mode and added 21 more companies over the next decade. Ares Management picked up Resource in 2021 and has continued to nurture the platform. (See Private Equity Fuel$ Consolidation of Label Industry – September 2021).

Another champion label consolidator, Brook + Whittle, is no slouch when it comes to rolling up the label industry. With backing from Genstar Capital, B+W acquired LLT Labels, a specialist in the manufacture of thermal transfer labels. Located in Stow, Ohio, the acquired company represents the 17th production facility for B+W. Based in Guilford, Connecticut, B+W, like Resource Label, is now backed by its third private equity firm. B+W entered the world of private equity in 2009 with an investment from RFE Investments, along with independent sponsor Charter Oak Equity. RFE and Charter Oak added several acquisitions, professionalized the company along the way, and sold B+W in 2017 to TruArc Partners (né Snow Phipps Group). TruArc Partners added several more companies to the platform, exiting in 2021 with the sale to Genstar Capital. Genstar has now added three more companies to the B+W roll-up, including the acquisition of Cenveo’s Custom Labels Group, a critical turn away from labels for Cenveo as it unwound itself. (See Cenveo Returns to its Roots – July 2022).

Fortis Solutions Group also has to be considered as a challenger in the championship ring. The Fortis network now spans the US from its original location and home base in Virginia Beach, Virginia, to Napa, California, Whitefish, Montana, Lewisville, Texas, and with the acquisition of Profecta labels last year in St-Hubert, Quebec, now up to Canada. Fortis is still with its secondary private equity sponsor. After an initial seven-year roll-up without PE-backing, the company teamed up with San Francisco-based Main Post Capital Partners in 2017. Main Post Capital Partners supercharged the next phase and Fortis acquired no less than eight additional companies in just under four years. In October 2021, Main Post Capital Partners announced that it had exited Fortis, selling its interest to Harvest Partners, a private equity fund based in New York. Harvest hit the road running and provided financial and strategic support for the six companies added to the Fortis platform in 2022. We expect it will not be long before another Fortis acquisition hits our deal log. (See Private Equity Feeds Industry Growth – December 2022).

Inovar Packaging, headquartered in Dallas, Texas, was founded in 1964 as a simple printer of one-color plain labels. It took twenty years for the company to transition to full four-color process printing. Six years later, in 2000, the company dipped its toe into the acquisition game in a merger with Label 1 and launched the Inovar brand for the combined entity. It took an investment by private equity to get the deal juices flowing at Inovar, with AES Investors stepping in as the new owners in 2016. We count no less than eight acquisitions under the sponsorship of AES Investors, culminating in the purchase of Dion Label Printing in 2021. As with the other contenders in the label slug fest, the private equity sponsor eventually needs to exit the investment and realize the value they have added via the acquisition and bolt-on conglomeration process. AES was no different and in 2022 Inovar was sold to Kelso & Company private equity firm. Kelso has a unique place in the universe of private equity funds; its founder Louis O. Kelso was also the inventor of the modern ESOP when he hit on the idea of a structuring a leveraged buyout with the use of retirement plan assets. (The first ESOP was closely related to our industry, the employee buyout of a newspaper publisher, but that’s a story for another day.) Under Kelso’s sponsorship, Inovar announced the acquisition of Cimarron Label in Sioux Falls, South Dakota. We will not be surprised if Kelso picks up the pace and Inovar is in the competitive matchup more often.

In the Mix

Other competitors with PE backing, but possibly not quite as aggressive as the three top contenders, are in various stages of their PE life cycle, each vying for position ringside at the label printing industry roll-up.

Established over 40 years ago, AWT was acquired by private equity firm Mason Wells in 2015, completed one acquisition, however during this time, AWT mostly stayed on the sidelines. Morgan Stanley Capital Partners stepped in and acquired AWT from Mason Wells in December 2020, subsequently adding three new bolt-on acquisitions during 2022.

All American Label & Packaging, a portfolio company of Heartwood Partners, acquired Lotus Labels located in Brea, California. Heartwood came into the competition last March when it merged All American with Western Shield Label & Packaging, itself a serial acquirer of label companies.

I.D. Images has been very active in the label printing business over the eleven years that we have been tracking transactions, with a significant increase in deal frequency since picking up financial support from Sole Source Capital in 2021. Starting with simple blank thermal label stock, I.D. Images expanded its capabilities via acquisitions to include a wide range of label products. With a commitment to sell exclusively through distributors, I.D. Images has a clear advantage when a trade label printer is on the market but has stayed out of the fray for the companies that sell direct.

There are others in the competitive mix for label printing companies, such as Premium Label & Packaging, which was formed with financial support from Dunes Point Capital, and which has acquired at least four label businesses. ProAmpac, now a portfolio company of Pritzker Partners, occasionally acquires some label business as a component of an acquisition in its core focus area of flexible packaging and bag manufacturing.

On the Sidelines

Multi-Color Corporation has historically focused on larger deals, including its 2017 acquisition of Constantia Labels based in Vienna, Austria with a reported revenue of $690 million at the time. Since the merger with Fort Dearborn in 2021, Multi-Color has been mostly on the sidelines of the US label industry roll-up. With over 13,000 employees, operating 109 label manufacturing plants in over 26 countries, the company is on a larger scale. It simply takes more to move the needle at this size, such as the company’s December 2022 acquisition of Lux Global Label, which operates plants in Pennsylvania and Puerto Rico. (See Packaging Industry Consolidation in Every Direction – July 2021).

We would be remiss if we did not mention CCL Industries in this summary of the label business consolidators. CCL, the Canadian-based global packaging company, despite its size, has stayed out of the bidding wars that have characterized the prime label roll-up in the US. CCL has instead maintained a disciplined acquisition process seeking out unique niches within the larger label segment, including horticultural tags and labels, apparel labels, clinical trial labels and similar highly specialized corners of the market. While the market heated up, CCL managed to maintain an average purchase multiple of 6.1 times EBITDA over the past three years. (See CCL Industries Breaks the Rules – January 2022).
   
2023 February - 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
Welch Packaging Group No Data Elkhart, IN Nashville Box No Data Lebanon, TN 2/28/23 No Data Acquisition Corrugated boxes Link
Resource Label Group
(Port co. Ares Management)
No Data Franklin, TN Majestic Labels No Data Riverside, CA 2/28/23 No Data Acquisition Label printing Link
Minuteman Press, Puyallup
(Existing franchisee)
No Data Puyallup, WA Advantage Graphics No Data Sumner, WA 2/27/23 No Data Acquisition Printing & copying Link
Data Communications Management $118.7 Brampton, ON Moore Canada Corporation
(Sub. RR Donnelley)
No Data Chicago, IL 2/22/23 No Data Acquisition Diversified print operations Link
Granite Creek Capital Partners No Data Chicago, IL CP Direct No Data Lanham, MD 2/16/23 No Data Acquisition Direct mail printing Link
All American Label & Packaging
(Port co. Heartwood Partners)
No Data Dublin, CA Lotus Labels No Data Brea, CA 2/15/23 No Data Acquisition Label printing Link
Mill Rock Packaging
(Port co. Mill Rock Capital)
No Data New York, NY Keystone Paper & Box No Data South Windsor, CT 2/13/23 No Data Acquisition Folding cartons Link
Larsen Packaging No Data St. Charles, IL Alpha Container No Data Marysville, OH 2/9/23 No Data Acquisition Corrugated boxes & displays Link
Anderson & Vreeland No Data Fairfield, NJ Flexographic Consumables
(Div. Grimco)
No Data Fenton, MO 2/6/23 No Data Acquisition Flexographic supplies Link
WIP Ventures No Data Fairport, NY National Enquirer (+2 titles) No Data New York, NY 2/6/23 No Data Acquisition Tabloid newspaper Link
Sandy Alexander
(Port Co. Snow Peak Capital)
No Data Clifton, NJ Abbott Communications Group No Data Orlando, FL 2/6/23 No Data Acquisition
(New Direction)
Commercial printing Link
Brook + Whittle
(Port co. Genstar Capital)
No Data Guilford, CT LLT Labels No Data Stow, OH 2/2/23 No Data Acquisition Label printing Link
Inovar Packaging Group
(Port co. Kelso & Company)
No Data Dallas, TX Cimarron Label No Data Sioux Falls, SD 2/1/23 No Data Acquisition Label printing Link
SOL Capital Management No Data Vienna, Austria Polar Mohr
Adolf Mohr
No Data Hofheim, Germany 2/1/23 No Data Acquisition Paper finishing equipment Link
PPC Flexible Packaging
(Port co GTCR)
No Data Buffalo Grove, IL StePac No Data Tefen, Israel 2/1/23 No Data Acquisition Bag, pouches, lids & films Link
Tsuji Holdings No Data Reno, NV DynaGraphics No Data Reno, NV 2/1/23 No Data Acquisition
(Graphic Arts Advisors)
Commercial printing Link

   
2023 February - 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:
No Chapter 11 Filings Found this Month --- --- --- --- --- --- --- --- ---
Chapter 7 Filings:
Gray County Newspapers, LLC 2/7/23 No Data 23-50017 Pampa, TX 5th Northern TX
Lubbock
Robert L. Jones Brad W. Odell Newspaper publishing


2023 February - 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
Quad/Graphics - Printing facilities 4/28/23 No Data Merced, CA Quad Graphics Sussex, WI  2/20/23 Retail inserts & magazine printing Link
Quality Forms 3/14/23 No Data Piqua, OH None N/A Feb-23 Direct mail forms printing Link