Problems for print firms occur, says Clifford, because printers tend to define themselves within a particular sector and see themselves as product-led, and the market is now both solutions- and services-led.

There is no doubt that consolidation is causing widespread distress. Buyers are in a much better bargaining position and this, along with increased transparency, has lead to increasing pressures over the last 18 months.

Clifford gets up to ten calls a day from people who want to talk about their financial situation. “These are coming from companies across the UK print industry but companies with turnovers of £1m-1.5m seem to be hardest hit.”

Data collected by Begbies Traynor suggests that there are more firms with problems every year. Indeed, the BPIF’s most recent Directions survey reports that in the last three months, 10% of respondents have seen some change in ownership, whether by merger, acquisition or takeover.

Gary Edwards, growth and acquisition finance specialist at  Investec, says the level and speed of consolidation depends on the sector involved. “It will not merely be about the availability of capital – there will be more of a focus on value, with potential investors looking at what’s compelling about the business, why it has succeeded in the past and, more importantly, how it will succeed in the future,” he says.

Nicholas Mockett of Europa Partners thinks it more valuable to talk of overall “concentration” – that is how many players there are in the industry – rather than simply of consolidation. “It’s not uncommon to see polarisation in a mature industry. The medium to large firms will link together, with some sectors more vulnerable than others.

“Commodity sectors, like sheetfed, are more likely to see consolidation than growth sectors, like digital,” says Mockett.

“If the industry is not sufficiently concentrated then the conduct of the participants may be irrational and uneconomic, for instance in covering variable costs without covering fixed costs – just keeping a business’s head above water. This in turn will feed into disappointing performance which will eventually lead to concentration as businesses consolidate or close.”

“We need to be aware of new technology and we need to see capacity go out of the market. The sheetfed and web offset sectors are very fragmented and gravure has also taken on extra capacity recently.

Companies not working in a differentiated or niche market are vulnerable as supply and demand are not balanced.”

So consolidation can be a good thing.

Clifford agrees that while consolidation is difficult it does mean there is a “market of opportunity”, which is healthy in the long term. However, printers are suffering. “A recently merged company, and this was a lean, strategic merger, has seen its prices drop by 10% in the last six months,” says Clifford.

“There are good leaders with vision in the industry,” says Mockett. “It is the age of the entrepreneur and out of adversity comes strength.” However, Mockett does not think that there will be an influx of new entrants into print as “anybody can see that it is very difficult to get into and make money”

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NOTABLE CONSOLIDATIONS: PAST 12 MONTHS
Scarborough-based Pindar acquired Cooper Clegg creating a £139m web powerhouse in March 2007. The deal boosted turnover by £30m. Also in March, Manchester-based Kelvin Graphics acquired its fourth company in four years. The £6m-turnover firm acquired Linden Print Group, having previously acquired Direct Print, Direct Imaging/Grandville Reprographics and Marshall Hayward. In June 2006 MPG brought Lasting Impressions out of administration and merged it with its Unwin Brothers division. The company is aiming for a turnover of £20m by 2010.