Marco Boer: Thoughts on Wide-Format Consolidation

Marco Boer, Vice-president, I.T. Strategies

Marco Boer, vice president of I.T. Strategies and keynote presenter at this year’s Wide-Format Summit, shares his thoughts on the current state of consolidation in the wide-format printing segment.

 What are your thoughts on the current state of consolidation in wide-format?

Boer: “Consolidation is inevitable for the simple reason that we are still a very fragmented industry. And as a result, we're very inefficient in the scheme of things. And we're finding that there's larger, mainly private equity-driven companies doing roll-ups because they can take out all the back-office stuff.

“So, if I buy 10 wide-format print shops and consolidate all the back-office operation stuff, legal procurement, etc., I can make that more efficient, right? We're still using the decentralized system to produce the jobs. The second big thing is that many of these commercial printers, which see their core offset business going down, are now realizing they really should get into other businesses.

“In general, wide-format is one of the best, most profitable businesses you can get into in the print industry. The challenge is that wide-format printing is not simple. It has a very steep learning curve, and rather than investing organically, it's much more efficient for commercial printers to go out and buy wide-format print shops.

“And that's exactly what's happening, is that if you have a mid-sized wide format print shop, running somewhere between $2 to $10 million a year, you are a prime acquisition candidate. In a way, that's good news for the wide-format shop owners because while you might not want to sell, on the other hand, it gives some validation about the worth of your business. Should the time ever come when you do want to sell, this is a fantastic time.”

Within that context, do you see companies that are more general wide-format, full service, being more attractive than those that have a specific niche or capability?

Boer: “Not necessarily. Of course, a generalist in wide-format is good because they can punt into different applications depending on what the trends are within the industry at any given moment. However, if you are very specifically focused on, let's say, the production of soft signage, that in itself has value because you have the benefit of scale. That could make you more valuable and attractive to somebody interested in that.

“What they're looking for at the end of the day is – number one – growth: Is your business growing? Growth shows you're investing in it and there's organic demand. It's not necessarily profitability, interestingly enough, because you would think that you'd want to buy a profitable company, but most people who acquire businesses think that they're better managers. So they can get the profit to come right? What I want is that momentum. And so that's why growth is key.”

“And then secondly, tied to that growth number is access to customers. You want to make sure that you have a diversified customer base. You don't want your top two customers to control 40 percent of your business – makes you too vulnerable. Top customers should never be more than 10%.”

Is consolidation more robust in wide format than it is, let's say, in the commercial printing segment?

Boer: “It's a difficult question to answer because there are seasonality and, confidence reasons tied to this. And what I mean by that is, at the moment, interest rates are quite high. And so that makes the ability to acquire a little bit more challenging because you have a higher sort of hurdle to cross.

“For both wide-format and commercial, things have slowed a little bit as a result of that. However, having said all that, the larger companies in particular still have access to capital and there's a lot of money floating around that needs to be deployed. So, it's the private equity companies that are investing.

“What I have seen is that several wide-format print shops are now getting to be sizable. It is eye-opening, whereas in the commercial print business, most of these commercial printers you look at – Donnelly, Quad, etc. – they've been shrinking in revenue for years, whereas you take the top wide-format graphics providers, they're growing.

“These guys are doing incredibly well. And so that's the difference to me. Are there more acquisitions in wide-format than commercial? I'm not so sure. It's hard to tell, but I certainly see that there's more growth in wide-format than there is in commercial printing.”