This sort of consolidation within the industry is old news really, but what about those businesses that, instead of buying up competitors or absorbing smaller businesses within their field, are diversifying by bolting on new entities with expertise in a different field? Common stories, of course, are litho specialists adding digital arms or wide-format divisions. Less common are those print companies that are looking to the creative field to add value to their clients, and it looks likely that it’s a movement that will continue to grow. 

Tim Peppiatt, chief exeutive of London-based print management firm Paperhat, which last week announced the acquisition of creative firm Nirvana, says there are a lot of similar opportunities out there which, to a certain extent, have been borne out of clients’ dissatisfaction with agency networks and the decoupling space that has arisen from that. 

“No-one has all the pieces of the jigsaw at the moment so I think we will see these kind of arrangements growing. There’s room for lots of us because it’s very hard for any one company to totally satisfy the needs of a Volkswagen for example. No-one has it all, it doesn’t matter of you’re Williams Lea or Paperhat,” he says. 

Peppiatt says that to remain relevant to clients in an industry that is evolving so fast, “you are going to have to buy more things”, a fact that underlines his current drive to bring four more businesses into the Paperhat family. 

“There will continue to be consolidation because people do think bigger is safer and to a certain extent that is true because you have a wider customer base across a wider spread of services. Our client list gives us the opportunity to raise more money and attract like-minded businesses and that is what we are doing,” he adds. 

Also on the acquisition path, after a four-year purchasing hiatus, is digital print firm Inc Direct. This time chief executive Noel Warner says he is looking to add technology expertise to the business but in 2012 it was creative knowledge he was looking for, resulting in the acquisition of creative agency Wand. Warner says that lessons have been learnt. 

“If we were to do it again, we’d spend much longer on due diligence to make sure the chemistry, the culture and the fit was right. That’s the most important thing,” he says. 

“Creatives work in an entirely different way to a print company and you have to really understand each other, outline expectations and make clear everyone’s role up front, to avoid misunderstandings later down the line, and I think we probably didn’t do that.”

Despite the apparent bumpy road, the result was a boost in Inc’s credentials, adding what Warner describes as Wand’s excellent “media neutral capabilities” to its offering. 

Warner says it’s vital to integrate with a company that understands your proposition, not just one that does good creative. It is about the objective of the acquisition. 

“You can’t just acquire a company and say ‘Hey we do creative now!’ If you are a print company looking to get involved in creative, you’ve really got to understand their mindset. 

“There are so many areas of expertise in creative. Do they design campaigns or do they design brochures? You have to know what it is they do and how to sell that creative and if you don’t have that experience you could catch a cold,” he warns.

Peppiatt goes a step further and says that while incorporating a creative business into a print management company like Paperhat is a “logical fit”, he believes that printers should definitely think twice.

“Printers in this country are amongst the best in the world but when you’ve got millions of pounds of machinery, you have to drive sales into it, and that’s really their focus. We are more strategic and creative, whereas printers are naturally more outcome driven,” he says. 

He underlines Warner’s point saying that an acquisition is about buying a culture, not just a business and that it’s a mistake to “bludgeon” your own culture onto the new business. “You need to share values and vision. If not, it’s all about money and it will unpick and fall apart,” he adds. 

Mergers and acquisitions specialist Paul Holohan, shares this view and says culture is a point that will make or break an acquisition.

“Laying out a lot of money for a creative business with a couple of key individuals in it is a highly risky thing to do. You can’t easily replace good creative people so if you fall out and they leave, you can be left in a pretty bad position,” a situation he has seen plenty of times, he says.

Holohan says that while not so many printers are scoping out the creative sphere, the number of firms involved in print management that are looking to boost their skills portfolios through mergers in the creative field is gathering pace. Aside from considering cultural fit – the number one deal-breaker, he says – acquisitive firms must test the market with clients and make sure they understand the reasons behind a potential acquisition and buy into the benefits. 

But he points out that acquiring is, of course, not the only way to offer a fully integrated service.

“It’s a question of which is the most appropriate. Arguably the most effective but also the most risky is to have a full-blown merger or acquisition but of course there are collaborations, project partnerships or developing new divisions from scratch.”

Peppiatt says that the benefit of buying over growing a new division organically is that “you aren’t negatively impacting your business by having a go at something that another company has taken years to develop, both as a culture and an expertise”.

And managing director of W2P software developer Infigo, Douglas Gibson agrees. “Building the right team is about finding the right people and an acquisition isn’t just about growing the clients it’s about getting the right people on board that can help drive the business and hit the ground running,” he says. 

A fortnight ago the Crawley-based company completed the acquisition of digital marketing firm Netkandi as it looks to broaden its offering, and Gibson believes these types of marriages can only benefit the industry.

“This kind of natural attrition makes sense, there are so many opportunities out there. We’ve seen the whole creative and marketing world dismiss print for some time, but there is a huge turnaround and these businesses can help take print forward because it’s now a real force in a much wider marketing mix.”

Holohan says clients are buying differently and market conditions are driving a need to adapt. “Print buyers want more than print now, it’s a multi-channel world.” 

Savvy print businesses with the right resources will get on board that train, he says.

OPINION

Acquisitions are good when approached with caution

Charles Jarrold, chief Executive, BPIF

Market wisdom has it that most takeovers destroy value. It’s also even been heard said that print has had its day. As it happens, both these statements are, simply put, nonsense. No one would doubt that the media environment has changed radically, and, when environments change, it can be risky to stay in the same place. So, how should print companies respond, and do acquisitions offer a good solution?

With a few exceptions, those companies that have gone on acquisition splurges, with the simple belief that profitability will follow scale, have been proved wrong – sometimes spectacularly. However, a carefully considered acquisition strategy, for example to develop a coherent set of capabilities, can and does work. 

The days of simply taking a client specification and matching a price are over. Now, the requirements are to understand the client’s needs, and then create and deliver on a desired outcome, often bringing together creative, informational, production, logistical and analytical capabilities. A business may have a clear view that it needs to develop its offering, in response to a more integrated, targeted, data driven marketing and communications world, but not have the core capabilities in-house. This is where acquisitions can help – especially where the services being acquired dovetail with the existing business.

So, yes, acquisitions can create value, but they should be approached with a healthy level of caution: is the business to be acquired a “good business”? Is it a good fit? How exactly is the acquisition going to add value? Is there a plan to integrate the business? Critically, in a creative enterprise, what’s going to happen to any key staff? These questions will bring a sense of realism into the process, and stop deal-zeal taking over as the acquisition process gathers a momentum all of its own.

READER REACTION

To add or not to add services – now that is the question

James Adams, managing director, AR Adams & Sons 

I’m not in the market for either mergers or acquisitions personally, I’m happy printing for and working with all-comers, some of which are creative agencies. We have moved into other areas like large format and signage so it would be hypocritical of me to say printers should stick with print, because you have to go where the work is, but I wouldn’t want to alienate one agency over another by suddenly becoming one of their competitors. We like to build strong relationships with them but I think arms length is a better fit for us.

Michael Burman, managing director, FE Burman

The problem with ink on paper is that it’s a commodity. Yes you can offer different services like design but fundamentally that is just tinkering away. The bigger issue we as an industry have is building relationships with clients that help them do their jobs better. We need to be seen as the place to go to for advice and support and ultimately production, rather just a supplier. If M&As allow you to offer advice then great but more importantly you want clients to want to come to you for that advice. It’s no good having the capability if no-one is listening.

Duarte Goncalves, managing director, DXG Media

Most print companies offer more than ink on paper in order to survive. I’ve seen traditional litho companies disappear by trying to be cheapest and I’ve seen companies embrace change and diversify. Adding creative services is certainly one way of protecting your business. We work closely with creative clients, which cements understanding and improves end results. There are also benefits like marketing services and online opportunities that some of these creative outfits already have experience of. 

If the synergy works for you, why not?