According to Paul Holo-han, chief executive of M&A specialist Richmond Capital Partners, a strategic alliance is a low-cost alternative to a merger or acquisition that has the potential to offer lower costs and reduced risk to print companies. He adds that it can also open up new opportunities not accessible to a company working alone.
"They are particularly beneficial where the two companies are like-minded and where the cultures compliment each other," says Holohan.
Reducing risk
For printers under pressure from increasing consumables costs, paper shortages and an erosion of run lengths, the promise of reduced risk and costs seems almost too good to be true. Indeed, it would seem print is slightly sceptical as the trend appears to be very much against strategic alliances in favour of more traditional M&A deals.
In the past month, for example, there has been the merger of SCR Envelopes and Tower Supplies, while Dsicmm was bought by US-based DST Systems and will now be merged with its UK print and mailing operation DST Output to form Innovative Output Solutions.
However, that is not to say printers are deliberately ignoring strategic alliances, it may be that the problem is more one of a lack of knowledge about them, rather than avoidance.
Indeed, when you do look at where strategic alliances have occurred in print, the story is generally a positive one. A prime example of success is the partnership of direct mail printer 4DM and commercial printer Eclipse Colour.
"We have a long-standing relationship," says Lance Hill, 4DM group sales and marketing director. "We’ve worked on pitches together for several years now. The set-up is definitely complimentary and there is never any competition, as we both serve different sectors."
He adds that, as a result of the alliance, the company can pitch for work it wouldn’t nor-mally be able to challenge for.
"The alliance means we can punch above our weight and offer a broader range of services," he says. "If you have a clear understanding and are totally transparent, it can work very well when tendering for work. It also helps to have a common goal."
The two businesses have no plans to merge as Hill says the companies are running successfully as separate entities.
He adds that for SMEs, this form of partnership deal is the perfect way to gain a market advantage.
"It is a positive thing for printers to do, especially for SMEs," he says. "It broa-dens horizons and will complement existing services. You’re not treading on anyone’s shoes and the clients can also see the benefits."
New opportunities
"The alliance means that we can get involved with areas that we wouldn’t normally be able to," agrees Simon Moore, managing director at Eclipse Colour. "There is no involvement financially and it makes sense for certain companies to place the jobs with each other."
Support also comes from the perhaps surprising source of Steve Allot, managing director of the recently merged envelope overprinting company SCR Envelopes.
Despite opting for a merger with Tower Supplies, he admits that alliances can be "extremely beneficial" for both parties in the short term.
"They would suit a number of companies in the industry, supporting and aiding immediate business prospects and development," he says.
However, he adds that a merger has allowed SCR Envelopes to respond to its customers’ requirements for increased capacity and a quick turnaround of colour printing, giving a more long-term advantage than a strategic alliance perhaps could have offered.
Long-term advantage
"It enabled us to focus on long-term goals, bringing together valuable resources to invest in the company’s future," says Allot. "SCR and Tower had similar objectives, business values, target markets and expertise, so for us, a merger made economic and commercial sense.
"What is important is that printers only enter an alliance or a merger after making an informed decision based on sound rationale and clear business targets."
To make an alliance work it is essential to have commitment from both parties, with both gaining from the relationship. There also needs to be flexibility and understanding if circumstances change.
The most crucial factor though, as in any partnership, is a commonality of cultures and understanding of aims. If you have this, then a strategic alliance may well be your best option in the current economic climate to becoming a more profitable and competitive company.
