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For Three Firms That Grew by Acquisition, the Art of the Deal Came from the Guidance of Their Professional M&A Advisors

Even experienced fishermen know that there are times when they shouldn’t cast a fly without the help of a fishing guide. A guide knows where the best fishing holes are and how to land the prize fish in them. It’s much the same with mergers and acquisitions in the printing industry. The best catches are made when the principals rely on the skills of deal-savvy M&A advisors.

By Patrick Henry
Published: October 24, 2011

Even experienced fishermen know that there are times when they shouldn’t cast a fly without the help of a fishing guide. A guide knows where the best fishing holes are and how to land the prize fish in them. It’s much the same with mergers and acquisitions in the printing industry. The best catches are made when the principals rely on the skills of deal-savvy M&A advisors.

Three print company executives who recently grew their businesses by acquisition agree that the research, legwork, and counsel provided by their M&A advisors were ultimately what made the transactions successful. They’re also unanimous in their belief that the investment cost of engaging an M&A advisor is money well spent—especially in an economic climate that can turn do-it-yourself dealmaking a high-risk proposition even for the smartest managers.

Each had a clear strategic goal in seeking to acquire another company. For Carl Grossman, president of Craftsman Press, the objective was to find a candidate that could augment Craftsman’s existing strengths in direct mail and fulfillment. Walsworth Publishing Company, a producer of yearbooks and other publications, wanted to enter the web offset market, says Jeff Vogel, CFO. Roy Grossman, a principal of MSP Digital Marketing, was determined to begin building MSP’s network of digital service providers with just the right fit—a challenge, he says, given the fact that “the landscape of digital printers nationally is enormous.”

In all three cases, professional M&A advisement helped to make the challenges manageable.

Don’t Quit Your Day Job

“It’s hard, when you’re running a business, to find a suitable candidate,” says Carl Grossman. “Doing a deal is a full-time job.” Even when the right candidate can be identified, he adds, there are the tricky matters of making the initial approach and finding out whether the target company is capable of closing the deal.

Grossman says that Craftsman’s M&A advisors headed off this potential aggravation by acting as its representatives at every stage of the process. First, they listened carefully to a set of criteria that Craftsman had drawn up for the kind of company it wanted to buy. Once their database had yielded a target matching these requirements, the advisers made the overture on Craftsman’s behalf.

Craftsman gained “instant credibility” in the target company’s eyes by having M&A professionals act as its emissaries, according to Grossman. “They know how to talk to principals in this market,” he says, noting that if he had undertaken the approach on his own, “it might not have worked.”

Vogel tells a similar story about a deal that took Walsworth and its M&A advisors about a year to plan, execute, and close. The advisors began by drawing up a list of about 60 companies that appeared to meet the prospective acquirer’s specifications. This field was narrowed down to about 30 companies chosen to receive solicitation letters. 

Better than half of the recipients wrote back—an enthusiastic response that could be ascribed, Vogel believes, to the M&A advisors’ high profile in the industry and the stamp of credibility that this reputation gave to Walsworth’s offer. “People know them,” he says.

Eventually, says Vogel, the advisors “got us to the letter of intent stage” with the company that Walsworth decided to purchase. The result exceeded expectations. The deal, according to Vogel, was “extraordinarily successful.” Its signing will rank, he believes, “as one of the key moments that defines our company in the future.”

Professional M&A advisement produced the same kind of time- and stress-saving benefits for MSP Digital marketing in its acquisition of a firm specializing in direct marketing, collateral management, and document solutions. “If you don’t have professional assistance, it becomes all-encompassing,” says Roy Grossman of the workload inherent in an M&A deal.

It’s invaluable, he adds, to have the help of a third party that can “run interference for both sides” in the delicate early stages of negotiation. Mediation by an M&A advisor eliminates tension, Grossman says, by getting the proceedings off to a cordial start and keeping them on a positive note all the way through to signing.

A Price Worth Paying

Professional M&A advisement isn’t free. It’s an opportunity cost that pays off in the long-term success of a merger between well-paired partners in a well-structured deal. As Vogel observes, it’s the necessary and desirable alternative to “the cost of a bad transaction”—a cost that often falls upon would-be dealmakers who try to proceed without expert help.

By engaging an M&A advisor to oversee the due diligence and scrutinize the financials, says Carl Grossman, “you’re not going to make a mistake in pricing the deal or in taking on something you can’t afford.” That assurance yields a “comfort level” that do-it-yourself dealmakers don’t enjoy.

Roy Grossman shares his brother’s appreciation of the serenity that professional M&A advisement can bring. Being certain that the other party’s representations are valid “gives you peace of mind that you’re doing a good deal.” And, he emphasizes, the fee paid to the advisor “is not a significant percentage of the value of the deal” when all goes according to plan.

Even when it doesn’t, there’s still a dividend in having hired an advisor. “An engagement can be successful because you closed the deal, or because you didn’t close the deal,” Grossman explains. “The only thing worse than no deal is a bad deal.”

Vogel, who relied on the services of printing industry M&A specialists New Direction Partners (NDP) in Walsworth’s acquisition, sees another way to justify the cost of M&A advisement. He believes that if Walsworth, acting on its own, had chosen a second-best acquisition target instead of the one proposed by NDP, the resulting reduction in the value of the deal “would have exceeded their fee.”

A Forward-Looking Strategy, not a Last Resort

All believe that as the printing industry continues to reshape itself through consolidation, professionally managed M&As will become standard business practice among firms that want to grow and prosper.

At Craftsman Press, says Carl Grossman, “we are constantly looking for the right partners” to add new capabilities and to expand into untapped markets. He sees growth by acquisition as “good and viable alternative” to going it alone in economic conditions that are making individual survival difficult for many firms.

“More consolidation is going to have to happen for the industry to be healthy,” agrees Vogel. He urges owners to “put egos aside” and consider the opportunities that wisely structured mergers can offer them.

But the window won’t remain open forever, says Roy Grossman, noting the downward pressure on business valuations throughout the printing industry. “Your business probably isn’t worth what it was at its peak, and may not be again,” he cautions.

That reality underscores the need for the resources and creativity of M&A experts once the decision to pursue an acquisition has been made. With the future prosperity of the business riding on the outcome, declares Carl Grossman, “you cannot do a deal without an M&A advisor.”

Patrick Henry, Executive Editor for WhatTheyThink.com is also the director of Liberty or Death Communications, a consultancy specializing in research, education, promotional, and editorial support services for the printing and publishing industries.

Patrick Henry is available for speaking engagements and consulting projects. To get more information contact us here.

Please offer your feedback to Patrick. He can be reached at patrick.henry@whattheythink.com.

 

Discussion

By Charles Corr on Oct 24, 2011

Consolidation will continue. You have to have a strategy that addresses this. As with most things in business, if you don't have the expertise you need to work with someone who does.

 

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