Just prior to the announcement that Kevin Cushing was leaving his post as CEO of AlphaGraphics, WhatTheyThink interviewed the 2011 recipient of the Print CEO of the year award about the deal... In this interview, Cushing spoke very positively about the change in ownership... Watch the pages of WhatTheyThink for more details on this breaking news. So far we have had no response from AlphaGraphics headquarters to our requests for an interview.
Franchise network AlphaGraphics has a new owner. Long-time owner Pindar in the UK got caught up in the UK’s deteriorating economic climate and ended up filing the UK’s equivalent of a bankruptcy action. AlphaGraphics CEO Kevin Cushing explains: “In the UK, the board of directors for a company is required, as part of each board meeting, to reaffirm that they can meet their obligations as they come due. Unfortunately for Pindar, they reached a point where they could no longer make that affirmation.”
Cushing indicates that the company brought in consultants in the latter part of 2010 and early 2011 in an attempt to streamline operations and allow them to “weather the storm” from a productivity and efficiency standpoint. In addition, in the spring of 2011, HSBC extended terms to allow Pindar to fund changes that needed to be made. However, as the economic environment continued to deteriorate, Pindar had to make some tough decisions. Once the company acknowledged that it could not guarantee its ability to meet its obligations, it had no choice but to seek protection, which is called Administration in the UK and requires appointment of a court appointed administrator, similar to a Bankruptcy Trustee in the U.S. The job of that administrator is to shut down or sell assets to preserve cash for the benefit of creditors.
“Because AlphaGraphics was profitable and a cash generator,” Cushing adds, “we were not the first area they focused on. The first focus, when Pindar went into Administrator on July 26th, was to sell or close businesses that were draining cash. We were the last business to be addressed in the process.”
A Google search revealed a “placeholder” website for Pindar, indicating that the company is now a subsidiary of the York Mailing Group. Cushing says, “The Pindar name in printing is still alive in the UK, but is now under different ownership. Andrew and Tom Pindar and their family have been part of AlphaGraphics for a long time. Their investments in and dedication to the business helped steady the network during unsettled times in the past, through acquisition of a greater ownership share, participate in and support of our NetVision initiatives, and more. We are very sad about the unfortunate turn of events that led to this. I came to work here because of Pindar and the people. We have had a long relationship and a good mentorship. Even with our parting of the ways, I hope to be able to extend that for years to come. Pindar helped both AlphaGraphics and me become what we are today, without a doubt.”
That being said, AlphaGraphics, Inc., is now under the ownership of Blackstreet Capital Partners II, a Maryland-based private equity fund, and Cushing is bullish about the future of the relationship and its impact on the AlphaGraphics network.
“This transition has been seamless for AlphaGraphics,” Cushing said, “and the Blackstreet Capital people have been fabulous to work with. They were on site here at our headquarters within hours of closing the deal. They were clearly the most proactive of the potential buyers and our team had a very positive reaction to them. If you have to change ownership, we wanted whoever would be best for the company and the network, and Blackstreet was high on our list.”
Cushing indicates that once the transaction was completed, there was a tremendous sense of relief that the period of uncertainty was over for the company, but a sadness about the circumstances that led to the transition. He says, “Blackstreet had been looking at franchisors as an investment, and finding one of the scale of AlphaGraphics that holds an industry leadership position was very appealing to them.”
Cushing also praised the network for its continued dedication to business growth during the difficulties, saying, “We kept our franchise network informed of developments, of course. But I really need to congratulate the network for focusing on their circle of influence, not their circle of concern (i.e., things they could affect versus things they could not affect). Our network achieved nice sales growth and our owners maintained a very aggressive attitude during that time. This was reflected both in terms of our sales results and the fact that owners are getting winds with new marketing services all the time.”
According to Cushing, Blackstreet Capital has excelled at finding companies in distressed situations and being able to create a dramatic turnaround in performance. “AlphaGraphics was a very unusual opportunity for them,” he adds. “It was a health company that was caught up in the distress of a parent company. Those types of opportunities don’t come to them very often, particularly a company in a leadership position that has been profitable for a long time. They were also impressed by NetVision 4, our strategic operating plan, and the fact that we can grow the business off of our current platform.”
Cushing points out that Blackstreet typically buys companies with the intention of holding them for five to 15 years, saying, “They are not a short-term fund with the pressure to turn companies.” Blackstreet holdings include a wide variety of companies, everything from the largest holiday ornament company in the world to cataloging businesses. The common thread is some form of distress associated with the company but with value to be had. “They have a proven formula,” Cushing says, “like we did in the restaurant business: press these levers to improve performance. In our case, we are focused on the unit level performance of our franchisees, as we always have been.”