Something else was needed. “The business itself was very successful and had achieved a healthy growth,” he explains. “But capacity was starting to become an issue and a potential obstacle to future growth. There are several options for companies where almost is not enough and that want to move to the next level – buy more equipment, take on more staff, branch into new sectors, move to bigger premises. We took perhaps the most complex route, and one with plenty of risk. We underwent a merger.”
The challenge
Mercury Packaging is 18 years old and until last year was growing steadily, its 50 staff making a turnover of £7m providing flexible packaging to the food, security, publishing, retail and mailing industries. The business in Nottingham prints and converts its own products, utilising an eight-colour flexographic printing press.
“But Mercury wanted more capacity and was considering buying a new printing press,” recalls Rose. “This is a very big investment, a million pounds plus, and a further £250,000 on infrastructure such as electricity, racking, staff training and abatement. Another big factor was space, and Mercury did not have enough to take on more kit like its existing eight-colour Uteco Onyx flexo press.”
It was at this point, around mid 2016, while Mercury was “mulling over buying that extra piece of kit to take it to the next stage”, that CPS Flexible made its approach. Like Mercury, CPS is well established and East Midlands through and through. The 100-staff company established in 1969 serves the packaging needs of the clothing and food trades in Leicester and has a £9m turnover.
“Both companies were in a bit of a bind. As individual businesses they had been very successful and achieved sustainable levels of profit. But capacity was starting to become both a worrying issue and a potential block to the future growth of both.
“The main weakness at Mercury’s Nottingham base was its lack of space, print capacity and infrastructure. For the Leicester home of CPS Flexible it was the lack of capacity for their big presses. In November 2015, it had bought a €1m Soma Optima flexo press, so it now had two eight-colour machines and was desperate to fill that extra capacity.”
It quickly became evident there were several areas for “synergy” between the companies, he says. Despite both operating within the food and publishing markets, there were few common customers. But there were areas where Mercury Packaging could benefit, such as from CPS Flexible’s extrusion capabilities. Meanwhile Mercury’s lamination equipment – it runs a seriously efficient Uteco Eclipse solventless digital laminator – could be useful to CPS Flexible.
The method
Mergers create “turmoil” that goes beyond the complexity of money and legal issues. And though much attention focuses on the financial aspects of merging companies, less emphasis has focused on the human element, says Rose: “But successful merger management absolutely requires successful management of the people involved”.
He adds: “Merging two companies with their different policies, procedures, and cultures will create stress for all the people involved. The staff from both companies will have to deal with new people, new procedures, possibly more work, and perhaps the loss of previous co-workers.
“Agreeing personnel matters and how we would work was one of the most important aspects.”
But the most crucial decision, insists Rose, was to appoint a senior management board for both sites. These included Rose himself, a former CPS production director who is now group managing director, Mercury sales director Ray Franks and chairman Tony Stanger, finance director David Mallison, operations director Jonathan Woodcock and production director John Fisher.
Personnel apart, merging is nevertheless expensive and cost Rose’s team between £50,000 and £75,000 on legal fees, paperwork, due diligence, restructuring shares and complying with corporate law.
The newly formed business now operates under a holding company, Fusion Flexibles, but has retained the Mercury Packaging and CPS Flexible brand names and both sites. “We wanted to keep the locations for the time being. They are well established and well known. It offers the business a welcome continuity amid all the inevitable upheaval of a merger. But it also gives resilience and peace of mind for customers to know we have two operations in case a machine or one of the two sites goes down.”
The new merger primarily targets the food, publishing, retail and security markets, with Mercury Packaging in Nottingham using its printing, conversion and lamination gear to offer specialist services to niche customers. CPS’s base in Leicester meanwhile takes standard work from Nottingham to max out on capacity and thump out work 24/7. It also has extensive extrusion capability for the production of polythene (PE) and polypropylene (PP) films to complement its print and bag making functions – work that Mercury previously had to buy in.
The result
The Mercury Packaging and CPS Flexible merger has led to the formation of a major flexible packaging company with a combined turnover of £16m and a forecast growth rate of 25% over a three-year period. The strategy this year is to transfer business elements to their respective sites to bulk up capacity at Leicester and target niche specialisms in Nottingham such as lamination, security and pouches.
“We had two bank accounts and now have one and we are looking at having one website. But for now that’s as far as we are going in bringing the companies together. We may at some point merge the brands into one, but nothing as yet is agreed. Our customers know the two existing brands well and for now we will stay as two separate entities.”
Biggest challenge focused on people: “Understanding how they work is not easy, and when you’re doing it across two sites, it is even harder. Some people use stock systems in a totally different way from others, for example. It can be difficult to tie it all together: it’s like one language for one site and another language for the other. This calls for constant communication and clarity of message.
“You need to take as much time as you spend with your financial analysts with your employees because people care about where they work. So it’s important to get staff in both the merging companies together as early as possible. Discuss the perceived potential benefits behind the merger and how they all fit in openly and frankly.”
Rose adds: “If managers truly believe people are our most important asset we need to prove it by treating them that way. Though it’s tricky, a merger gives you an opportunity to do well by your staff by being honest and keeping them in the loop. If you can do that you will not only carry them along with you, but you will keep them long after the merger has bedded down.”
VITAL STATISTICS
Mercury Packaging and CPS Flexible
Location Nottingham and Leicester
Inspection host Group managing director, Simon Rose
Size Combined turnover: £16m; Staff: 150
Established 1999 and 1969
Products Laminates and flexible packaging such as high-clarity PP films for the food, security, publishing, retail and mailing industries
Kit Combined kit includes an eight-colour Uteco Onyx flexographic gearless printing press, an eight-colour Comexi gearless press, an eight-colour Soma Optima flexo press, six extruders, Uteco Eclipse solventless digital laminator and a range of converting, slitting and rewinding equipment
Inspection focus Implementing a successful merger
TOP TIPS
Embrace change Everyone has to buy into the merger, so be realistic in your workflow planning and give yourself and your departments time to work up to full speed
Give strong direction Management needs to give clear direction to staff “especially if unforeseen circumstances prompt changes in the outlined strategy”, says Rose
United we stand Directors and other senior management must stay united to encourage harmonisation and ensure confidence levels remain high at all levels of the business
All systems go Merged companies may need to get their IT and MIS systems harmonised and properly integrated to function well
Keep talking ensure clear communication with your existing customer base, suppliers, distribution people and employees across the board
