By Milt Vine
As all those ads for Godzilla endlessly reminded us, size does matter. Of course that’s probably a conclusion many of us reached on our own and it’s exactly what came to mind as I read about the merger of BankAmerica and NationsBank back in April. This combination of banks established a company with $570 billion in assets, $45 billion in shareholders' equity and a market capitalization of $133 billion. According to Bank Of America press releases, the purported goal of the merger was a "truly national banking franchise" with "unprecedented capabilities and convenience."
But, as Stacy Perman pointed out in Time soon thereafter, "If recent mergers serve as a guide to the future, the brave new world of financial services means higher costs for consumers, at least initially." And within Perman’s essay, Ed Mierzwinski of the U.S. Public Interest Group (USPIRG) said, "Fewer and bigger banks mean consumers face fewer choices, less competition and even higher fees."
Are mergers and acquisitions then a good thing, a bad thing or maybe both? And what do they have to do with my regular "Bindery Report" in this publication? Well, as I mentioned a while back, Seattle Bindery recently acquired Blake Letterpress, in addition to Add Products a few years earlier. Many recent Printing Journal issues have led with an acquisition story on the front page. And we’ve all followed the extremely aggressive acquisition program being implemented by Consolidated Graphics in Houston. So, good or bad, this is a subject our industry is facing.
National Trends. According to Securities Data Company, more than $236 billion in mergers and acquisitions activity from over 2,300 deals involving domestic targets took place in only the first three months of 1998. This represents more than a twenty percent gain in deal value from the same period in 1997.
Interestingly enough for those of us in the process of disseminating information, telecommunications was the leading US industry targeted for takeovers during the first quarter of the year. More than $36 billion, or about 15% of total domestic M&A volume, in announced deals were declared from 56 transactions. Thirty-five domestic M&A deals were announced with values in excess of $1 billion and nine of those deals were valued at $5 billion or more. Size matters, indeed.
The Printing Industry. Most printing industry M&A deals aren’t worth $5 billion, but it seems they’re growing in number and value. In 1997 hundreds of deals, big and little, took place, often affecting major players in the industry. Quebecor Printing (USA) bought Petty Co. and Brown Printing’s Franklin Division, while Graphic Industries purchased Presstar Printing and Bruce Offset and was then acquired itself, by Wallace Computer Services, which also picked up Post Printing and Moran Printing.
Other printers were acquired by their own management teams, and equipment manufacturers jumped into the fray as well. Heidelberg bought Linotype-Hell and the Agfa-Gevaert Group acquired DuPont’s $600 million graphic arts film and offset printing plate business.
1998 has seen little slowdown in the M&A trend. In the May issue of Printing Journal, David Lindsay wrote that, "As if to prove that consolidation in the traditional sense were somehow passé, Boulder, CO-based Mail-Well Inc. has turned two of its recent acquisitions into separate divisions, with each announcing major purchases of its own."
Mail-Well isn’t alone in continuing the trend. Consolidated Graphics, which picked up ten graphics companies last year, has already announced the purchase of Graphic Communications Inc. and others in 1998. If pending acquisitions are completed, Consolidated Graphics will have 34 companies under its umbrella. Presumably, it won’t stop there.
At Seattle Bindery. The question all this brings to mind for me is whether printing industry consolidations, like those in the banking industry, are based on a higher valuation of size rather than service, causing consumers to "face fewer choices, less competition and even higher fees." I’d like to think they’re not.
With my recent experience of consolidating Blake Letterpress with Seattle Bindery—certainly a much smaller acquisition than those I’ve listed—I’ve discovered the positives of a such a move. We now provide one-stop shopping, offering a full range of finishing services performed by cross-trained technicians. A streamlined workflow allows us to provide quicker turnaround and bypass the need to shuttle a job from one company to another. Also, being faster with more services makes us more efficient and able to pass the savings on to our customers.
Let’s hope the mega-mergers we’re witnessing in other industries prove as fortuitous, for the companies involved and their customers.
Milt Vine is president of Seattle Bindery, a postpress house specializing in custom
tabs and presentation folders; folding and stitching; foil stamping, embossing and
diecutting; plastic spiral, Wire-O® and perfect binding. You can reach Milt at
206/682-2558.
© 1998, Seattle Bindery. Reprinted from Printing Journal, July 1998.