SOURCE - The Target Report
Over the past thirteen years, we have chronicled, logged, and commented on the merger and acquisition activity in several print-centric business segments, with special attention to commercial printing, packaging (labels, folding cartons, & flexible packaging), wide-format, and direct mail companies. At the end of August each year, rather than focusing on the prior month’s deal activity, we take a look back at the past twelve months. If past is prologue, and to a reasonable extent we believe it is, then we hope to provide a high-level macro perspective on what the deal activity tells us about where the industry is headed. Which segments have experienced more, or less, deal activity? What are the trends in the buyers’ rationale to complete these acquisitions? Are acquirers adding facilities to their networks, or opportunistically folding acquisitions into their existing facilities? What does all this tell us about the potential future transactional activity within each print segment?
At the end of August every year, we review, categorize, sort, count, and chart the data we have collected, comparing the trailing twelve months (“TTM”) with the same period of prior years.
During the Covid years, we extended our look-back time frame to bridge the pandemic. We thought that the longer time period was necessary, and used 2019, the pre-Covid year, to provide a benchmark across the chasm created by the shut down, so that we might know when the market has returned to normal. In our M&A practice at GAA, we have finally reached the point where we no longer have to do mathematical somersaults in order to extract the impact of Covid from our analysis (well, not entirely, there are still PPP loans and ERC credits salted into many financial statements, but less and less as each month goes by). The Covid years of 2019 to 2021 are fading into the distance in our rear-view mirror, and we have returned to our pre‑Covid practice of a three-year comparison in most of the charts presented here.
In pure numeric M&A terms, deal activity during the past twelve months was off 5.0% from the prior TTM period, which was in turn off 10.0% from the prior year. We identified 189 transactions of interest during the past twelve months; the lowest number we have tracked in any period since we began counting for our annual reviews in the autumn of 2016.
Last year at this time, the big question was whether the economy could ease its way down from the euphoric post-Covid bulge in demand. We noted that the classic signs of turbulence were in abeyance, and it appeared that the economy, and therefore by extension the printing and packaging segments, might navigate the turbulence and nail the elusive soft landing. We noted last autumn that not all was well in our industry, however, as paper manufacturers and distributors announced deals that further consolidated the industry. Some paper mills closed, and other mills converted from printing to packaging grades, portending another possible tightening of the paper market in the future. (See The Target Report: Is a Soft Landing in Sight? – September 2023).
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