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WINNING STRATEGIES Growing Sales by a Strategic Acquisition Mergers and acquisitions are the new growth trend for quick and small commercial printers. By Mitch Evans I n a recent survey conducted by NAPL, 30 percent of the respondents indicated that they will be looking to expand their businessbyacquiringanotherprinter.Fiveyearsago,thesame survey results indicated less than 11 percent were looking to grow by acquisition. Why the change? I believe it's twofold—organic growth is become more and more difficult due to current customers ordering less, more competition, and mounting pricing pressures; and the old philosophy that "if we build it, they will come" no longer works. Sure, adding new services and equipment may bring in new business, but not enough. Of the 70 percent who are not looking to grow through acquisition, many said they are doing OK and quite a few said they simply didn't know the best way to get started. Others said it was expensive and some actually thought it was risky. Here's why printers are looking to expand by acquisition: • Expand their business & client base within markets they are already serving • Fillexcesscapacity • Add new products/services, expand capabilities • Diversifytheirclientbase • Consolidate overhead and other expenses • Enternewgeographicmarket The same survey asked those who had done an acquisition whether it was successful or not. Overwhelmingly, 87 percent felt the acquisition at least met some or all of the expectations and was overall positive. Only 6.5 percent said the acquisition fell far short of meeting expectations and was unsuccessful. seller is about the only game in town if you have to sell. Prices for general intangibles (the customer list) remain good, but there is some downward momentum for royalty percentages and number of years that a buyer will pay royalties. Sellers continue to misunderstand how price and structure of a deal works as it relates to what they believe is the total valuation of their businesses. Buyers are looking for bargains and some sellers continue to cling to the hope that someone will buy their business intact and pay cash. Many of the national print franchisors facilitate consolidation among their franchisees, and a few are very active in looking for "tuck in" opportunities that will help their franchisees grow. Financial results of from 2007-2011 were not trending upward for most printers. And while financial results for 2012 and2013yeartodatehaveimproved,the improvement has not been a dramatic one—two to three percent growth, on average, but even that is not uniform. The psychological climate continues to be negative, but is improving as economy rallies. Banking conditions enable distressed sale opportunities, but financing is very hard to come by for all but the very strongest buyers. Debt is the major hurdle to a successful merger or acquisition, according to many buyers. Cautionary Observations Proven Strategies As to the current state of mergers and acquisitions, I see very few sales of standalone entities. The sale of intangibles combined with orderly liquidation of the w w w. M y P R I N T R e s o u r c e . c o m Here are some proven strategies for quick and small commercial printers who want to consider acquisition as a path to (continued on page 57) For more information, visit MyPRINTResource.com/10007416