Hail to the Chief, and to a Great Year Ahead for M&As

By the time this column is published, the 2024 Presidential election will be behind us — and so will the uncertainty that marked everything leading up to this historic event. The feeling of not knowing what would come next was strong enough to put a bit of a damper on the pace of mergers and acquisitions in the printing industry this year. But now that the wait-and-see moment has passed, we could be looking at a blockbuster year for deals in 2025.

The macro reason for optimism is the state of the national economy. It’s strong and resilient. Inflation has declined while employment and consumer spending have held up better than expected. Although the chance of recession never goes to zero, history suggests that we would be very unlikely to experience one just as a new administration takes office.

Data from the economists of PRINTING United Alliance confirm that industry growth stumbled somewhat in the first half of 2024. That prompted many printing company owners to hit a temporary pause button on their plans to buy or sell. The same thing happened when fear of recession set in during the first half of 2023.

Wait for It

But, 2023 as a whole turned out to be almost as record-breaking in terms of M&As as the two years that preceded it. Given that many of the transactions we are working on won’t fully close until the end of 2024, there’s good reason to believe that the present year will come to a very solid close as well.

In other words, the first half of a year isn’t necessarily predictive: If the fundamentals remain strong, the momentum will almost always rebound. The good news is that fundamentals for M&As in 2025 are looking great.

Buyers are still out in full force in the market, and their interest in acquiring high-performing printing businesses hasn’t waned at all. Consolidation continues its march, fragmenting the industry and creating new opportunities to build synergies and achieve cost savings.

What we said at the beginning of this year holds true as we head into a new one: It’s a great time to be a seller of a printing business, especially the kind that attracts financial buyers.

These buyers operate on a buy-build-and-sell strategy that keeps them always on the lookout for new companies to add to the investment platforms they are putting together. In 2024, they completed more transactions than buy-and-hold strategic buyers, whose activity was robust in its own right. All of this bodes well for a repeat of a bountiful sellers’ market in 2025.

The Defining Dichotomy

Another fundamental force behind the pace of M&As is the widening gap between the printing industry’s “Haves” and its “Have-Nots.” Haves are firms that embrace and invest for the future to become communication providers with advanced production technologies, diversified product lines, and attractive service offerings, making it difficult for their customers to buy from anyone else.

Haves become profit leaders by staying out of the commodity pricing trap that competition forces less capable printers into. The ones stuck in the trap are likely to be have-nots: printing companies without resources for long-term growth and prosperity. Treading water as a have-not may have been possible once, but no longer. Owners of firms in these tough straits often find that selling to a have is the only viable long-term solution.

It goes without saying that the haves attract attention not only from financial buyers but also from search funds — business agents representing people who want to acquire companies that they can manage as the owners and executives in charge. But after starting with a have as a platform, they are open to acquiring have-nots given the enhanced cross-selling opportunities. Interest in the printing industry remains strong by both types of buyers and is sure to be just as intense in 2025.

And Away We Go

We expect buyers to be busy throughout the year as they craft smart acquisitions that pay off for all of their stakeholders. Although many players are active in the market right now, competition among them hasn’t necessarily made deals more expensive to close. EBITDA multiples remain stable, and asking prices should continue to be reasonable as more owners signal their intention to sell.

The uncertainty of an election year could be replaced by uncertainty about how business-friendly the new administration will turn out to be. That remains to be seen, but what we can say is that after enduring the huge distractions of presidential politics, the industry is ready to pursue M&A opportunities with vigor.

Growth is returning, and opportunities to buy and sell are multiplying along with it. That’s a post-election outcome we can all endorse no matter what side of all those other issues we happen to be on.