Consolidation: Whoever acts now, wins!

Every industry is consolidating. The printing industry is no exception. The main driver behind this is the declining demand for printed materials. This is forcing many companies to confront existential questions. In this situation, M&A is becoming increasingly important. Interest in buying or selling companies is growing. Now is the best time to capitalize on this situation. 

5 to 10%! That’s how much revenue many print shops lose each year. The reasons: price pressure, declining print runs, or a complete shift away from print. At the same time, operating costs are rising. Energy price shocks, price hikes for raw materials, supplies, and consumables—and currently, looming supply chain issues. Margins are under massive pressure. That is why many owners are asking themselves: What do we do now? The worst thing is: nothing. Waiting it out is fatal in this market phase. At a certain point, you lose control, and then insolvency and the potential loss of your life’s work are not far off. Early and targeted action is the better alternative. 

We have long observed how the structure of the printing industry is changing. The number of companies has decreased. In the coming years, there will be even fewer, though some of the remaining ones will continue to grow larger. This consolidation process is called “Merger Endgame,” though consolidation is no game—it is a matter to be taken seriously. As a result, the willingness to buy or sell has noticeably increased, and the number of attempted transactions has risen accordingly. Statistically speaking, 30 to 40% of these attempts are successful. 

If you are currently looking to strategically leverage this consolidation for your own benefit, experience has shown that the following 5 points are crucial to ultimately being among the successful ones.

1. Prepare yourself as thoroughly as possible 

It always starts with an uncompromising strategic decision. Do you want to continue growing through acquisitions, or do you want to exit and sell? Making this decision is a highly emotional process that takes a lot of time. Therefore, address it early on—ideally before there is any pressure to act. 

Once you have made this decision, prepare yourself and the company for the transaction process. Set goals for what you want to achieve and by when. Be clear about what you want to gain and under what conditions, or what you are willing to give up. If you want to sell, optimize operations as much as possible. If you want to buy, define your financial framework. Organize all relevant data and information about your business so that it is complete and presented in a structured format. This will always benefit you—even if all transaction attempts fail.

2. Find the company that’s truly the right fit for you

That’s easier said than done. The basic requirement is a clear profile of the desired partner. The more precise the profile, the more promising the search will be. At this point, at the latest, it makes sense to bring a specialized M&A advisor on board, because from here on out, confidentiality and secrecy are paramount. Searches are often conducted discreetly at first, because otherwise the market will know immediately, and that weakens your negotiating position. 

Once you’ve identified one or more potential matches, many questions will be asked and information exchanged. Focus not only on the hard facts, but also on the soft factors. As important as the transaction model and a plausible business plan may be, cultural fit is just as crucial. Different structures can be merged within months; different corporate cultures often never can. 

3. Negotiate—with each other!   

Now it’s time to get down to business. Data is examined in detail, risks are carefully assessed, price expectations are discussed concretely, and ultimately a plan is developed for how the transaction will proceed. Traditionally, two parties grapple with each other, each equipped with plenty of advisors and lawyers who try to get the best deal for themselves. High expectations from sellers often clash with buyers’ pragmatic proposals. Disappointment is inevitable. This is where most transactions fail. Confrontation creates losers. In this phase, therefore, a moderating approach is essential, one that seeks a fair balance of interests. 

4. Say “I Do”

At the end of the negotiations, the sales contract is signed. However, the process is far from over, even once the ink is dry. In this phase, it is important to develop an integration plan and prepare internal and external communications. 

5. Avoid Disappointed Expectations 

Successfully completing the transaction is a major achievement for all parties involved. However, this gives rise to legitimate expectations among the old and new owners, employees, and lenders. The integration phase determines whether these expectations are met or not. Cultures must be merged, systems standardized, processes redesigned, synergies realized, and customers delighted. This phase requires time, money, and resources. It is not a sure thing. Therefore, ensure you have sufficient management resources, plan conservatively, and act consistently. 

This approach is suitable for all transaction models. However, we note that there is currently a preferred model. Since production capacities in printing companies do not shrink in direct proportion to the loss of revenue, companies ready to sell are currently encountering buyers who have no interest in machinery and buildings, but only in revenue—that is, in the customers, orders, and, if applicable, the sales team. High purchase prices are rarely achieved in such cases, as revenue is volatile and has no expiration date. Therefore, sellers often cannot expect to receive more than 10–25% of current annual revenue. For this deal to be profitable for the seller as well, the real estate, machinery, and/or equipment must be sold in parallel, and a solution must be found for winding down operations. This requires close collaboration among an experienced team of specialists who work together to develop a model that benefits both the buyer and the seller. Cooperation creates winners. 

The consolidation of the printing industry is not stopping; it will continue in waves. That is why now is the best time to actively take advantage of the available opportunities and thus successfully shape the future of your company.