Printers look to merge in slowdown

Print service providers are responding to one of the most challenging economic environments ever by joining forces and expanding services to compete. In the past three weeks alone, three deals were announced in which smaller service providers merged or were acquired.

Most recent was the June 10 acquisition by Schmidt, a subsidiary of Taylor Corp. that specializes in printing and distributing cooperative direct mail packages, collateral print for publishers and freestanding inserts, of the cooperative direct mail business of Solar Communications, including Solar’s collating assets and paper outer-wrap technology.

“This acquisition provides a good opportunity to continue that growth and add some capabilities that we didn’t have,” said Jeff Winter, director of sales and marketing at Schmidt.

Executives at Heeter Direct and Archway Marketing Services, two other printers that recently acquired new businesses, each cited meeting customer demand for more services as reasons to grow.

On June 8, Canonsburg, PA-based Heeter Direct, a full-service print provider, announced it acquired Pittsburgh-based First Impression Printing, which specializes in die cutting and specialty fold and glue products. And late last month, Archway picked up the supply chain management division of Resolve.

Archway president Mike Moroz said the move was inspired by clients who wanted to “have more business with a fewer number of suppliers.”

For now, who may be next is unclear, but Dave Frankland, a principal analyst at Forrester Research, said more merger and acquisition activity is likely.

“I think you have to assume that’s going to happen,” he said. “One of the things we’ll probably see is more consolidation.”

A direct marketing ad agency executive, who declined to be named, noted, “A lot of printers and lettershops have either closed completely or closed some facilities within the last seven months.”

It’s not limited to the niche local printers either. “Most of the reason company A buys company B is to get company B’s customers,” said Ben Cooper, executive director at The Print Council. “They don’t want their location or equipment. They want the customers. If you’re in a declining market and you’re a family-owned business you might be open to talking to [a major printer about a potential deal].”

Quebecor World may have rejected RR Donnelley & Sons latest acquisition offer – the latest offer, made last week, was valued at more than $1 billion – but the ailing print giant is facing a tough road ahead with its reorganization plan as a result of bankruptcy proceedings.

Print companies can’t seem to catch a break. In addition to a steady decline in direct mail, more marketers are gravitating to digital communications, both for economic reasons and to simply follow their customers online.

Adding to that is a large number of marketers jumping on the “green” bandwagon, which can translate to less print-based marketing communications.

Though there are still plenty of marketers using printed material to promote products and services, in this economic climate many are mailing less or shifting communications to other, less costly media channels.

“We’re in the midst of an economic recession of historic proportions,” said Rick Segal, CEO of HSR Business to Business, a Cincinnati-based b-to-b ad agency. “We’ve seen a decrease in print and virtually all other communication forms.”

Another agency executive agreed. “Marketers are still doing mailings, but many have scaled back volume,” said John Colella, director of production services for agency Wunderman New York. “In the past, they had half a million prospects they would mail to. Now, maybe they’re identifying 100,000 and sending them direct mail, but everyone else is getting an e-mail. Postage rates are going up, everyone’s saving money.”

The fragmented web of mom-and-pop, local printing companies are even feeling the heat from major printers who increasingly encroach on their business.

Major printers are more inclined these days to accept relatively smaller projects with which they may not have bothered with in the past.

“A printer will print anything,” Colella said. “It used to be printers would turn down work. Nowadays these larger companies are actively searching for business they would have turned down in the past. They still don’t want to print, say, 5000 buck-slips, but they’ll go after the 100,000 piece [jobs].

“A lot of the larger marketers are consolidating their business with the larger print buying services,” Colella added. “They are going to bigger companies like RR Donnelley. Most of the local printers are just smaller mom-and-pop entities. It’s hard for them to be competitive with the bigger guys. Local printers are closing down or merging. It’s a really tough road to try and make a go of it in this economic climate.”

In order to compete, the smaller outfits are compelled to find ways to expand services and offerings, yet another driver of the acquisition trend.

“We’ll have to see more value-added,” Frankland said. “Can printing companies provide fulfillment? Can they provide microsites? They need to recognize how the world is changing and add on adjacent services that provide value.”

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