Shifting Tides in The Wide-Format Printing Landscape

The wide-format printing segment has matured and is fully integrated into the larger printing and graphic communications industry. Many commercial shops now include at least some type of wide-format production capability. Several years ago, we noted very few M&A transactions in which the acquired company was in the wide-format segment. Transactions involving wide-format printing are now a regular occurrence. Consolidation plays, while not rampant, are occurring on a steady basis.

As the wide-format business matures, we find that buyers are going down the same road traveled in past decades by commercial printing companies: growth via acquisition. In 2023, the percentage of transactions structured as tuck-ins in this segment increased to 50% of the announced total. This is a dramatic departure from 2022, in which the transactions were primarily driven by a desire to add a production facility. We see the greater percentage of deals structured as tuck-ins as a clear indication that the segment has matured. Owners of previously independent operations have decided that the time has come to join with a larger company.

During 2023, we noted only ten publicly announced transactions in the wide-format segment. This is 50% fewer than we found in 2022 and less than in any of the prior four years, which ranged from 12 to 24 each year. The reduction in activity was almost entirely due to only four buyers acquiring a wide-format operation in 2023 to expand production capacity, down from 13 in 2022.The downward trend in wide-format M&A activity is consistent with the reduction in M&A activity in 2023 across all segments of the printing, packaging, and related graphic communication businesses. However, the fall-off compared to last year was more pronounced in wide-format.

To form a picture of the various market segments that comprise the overall print-centric industries, we separate companies that produce primarily wide-format and related products from the more generalized commercial printing segment. We include retail display and trade show graphic production in this category, reprographics, indoor architectural environment graphics, and home décor products produced on wide-format equipment. Our data is organized by the stated primary products the acquired company produces. As we can see from the chart on Wide-format Segments, the interest has decreased in the undifferentiated category of wide-format companies that produce the more commoditized products, which we call “banners and boards.” There is a steady, albeit modest, number of transactions in companies that produce primarily fleet graphics. For somewhat obvious reasons caused by the COVID-19 pandemic, deals involving companies that produce grand-format, larger outdoor graphics such as billboards, stadium graphics, and building wraps spiked up after the stay-at-home period ended, but we found just one such transaction in 2023. For countervailing reasons, companies specializing in retail display were less desirable as the impact of the COVID lockdown was felt, but the number of deals climbed back up in 2023.

The Rationale Behind Wide-Format M&A – Convergence Returns

Based on the deal logs of transactions over the past five years, as recorded in The Target Report, we analyze the transactions reported by the buyers and sellers to determine the rationale behind the deals. Some clear patterns emerge each year — and over time — from our analysis.

Over the past four years, the primary driver behind M&A transactions in the wide-format segment has been the acquisition of a company that includes an additional production facility. This changed in 2023; we saw a significant decline in the wide-format acquisitions driven by the desire to acquire an additional production facility.

There was a slight uptick in tuck-ins during the past year. The current slight predominance of tuck-ins indicates that the wide-format market is maturing. An increase in tuck-ins within an industry segment often suggests that the acquired companies are financially challenged. However, that appears to be different with several tuck-ins this past year.

Instead, some transactions are driven by the convergence trend in the printing industry in which companies that formerly specialized in certain printed products enter new markets that require different equipment and expertise. Acquiring a tuck-in accelerates the convergence strategy to diversify and grow the business.

In sharp contrast to 2022, when commercial printing companies were largely absent as buyers in the wide-format segment, commercial printing companies are back as buyers of wide-format businesses. For example, Allied Printing Service, a commercial printing company based in Manchester, Connecticut, acquired XL Color Corp. Allied has a diverse offering of commercial printing services, including web and sheetfed offset, digital printing, and mailing services, among other related services. As the press release announcing the acquisition noted, the purchase of XL Color was a significant step in the company’s growth and diversity of product offerings. In other words, a tuck-in, yes, but more importantly, the logic behind the transaction is the convergence of different printing technologies and products under one company umbrella.

In another example of the convergence trend and the return of commercial printing companies as buyers of wide-format businesses, Heeter, based in Canonsburg, Pennsylvania, acquired Laurel Print & Graphics.

Heeter has evolved from a general commercial printing company into a diversified full-service provider of secure print, direct mail, and fulfillment solutions. Over the past several years, the company fully embraced the move to variable data direct mail production by adding web inkjet presses, supported by online print management software and secured by HITRUST and other certifications. Similar to the acquisition of XL Color by Allied Printing Service, Heeter and Laurel Print & Graphics reported that the acquisition was a natural next step as the companies had worked together for years before coming together. It was announced that Laurel will continue to operate in Duquesne, Pennsylvania, maintaining the Laurel brand, now as a division of Heeter.

Convergence was also evident in the acquisition by Kirkwood of DGI Invisuals, the graphics division of DGI Communications, an audiovisual systems provider. Based in Wilmington, Massachusetts, Kirkwood was founded as a company that initially printed technical manuals. The company became a general commercial printing company. Then, it progressed into a full-service print provider with a direct mail division, sheetfed offset and digital printing presses, vehicle and fleet graphics, and promotional products.

In an unusual twist on convergence, Kirkwood has a division that manufactures jigsaw puzzles for the toy industry. The acquisition of DGI Invisuals brings additional wide-format capabilities into the Kirkwood fold.

In a hint of a potential future convergence strategy, the Kirkwood announcement presaged that the company would offer audio, visual, and technology solutions in partnership with DGI Communications.

Geographic Diversity Key to Wide-format M&A Transactions in 2023

Companies focusing exclusively on wide-format printing have differentiated themselves into specialties, including in-store retail display, events marketing and decoration, vehicle wraps, building wraps, large fleet markings, and consumer décor products. As specialization has increased, so has the rationale to expand by acquiring companies that produce similarly specialized products. Since many of these companies are already niche-focused, the next logical step is often geographic expansion. Consistent with the overall decline in the number of M&A transactions in the printing and packaging industry, the total has declined in the wide-format segment. Proportionately, however, the push for geographic diversity remains a key reason buyers acquire another wide-format firm.

Vincent Printing, a provider of grand-format printed products based in Chattanooga, Tennessee, merged with BPGraphics in Phoenix, Arizona, to form a new company rebranded as the Convergent Print Group.

Strategically located in the south and west, the combined company prints and installs massive outdoor graphics, sometimes covering the sides of skyscrapers, entire trains from front to back, and traditional roadside billboards. The two former competitors and occasional collaborators came together with the clearly stated logic that geographic diversity made business sense for themselves and their customers.

Moss, an Eagle Tree Capital portfolio company, acquired MacroArt, a wide-format print, graphics, and branding company in the U.K. Serving Global brands, Moss already had production facilities in Germany and Poland, as well as at its home base outside of Chicago, Illinois. Initially founded in 1955 by an artist who designed and patented the first tensioned fabric pop-up tent, Moss has grown and evolved via multiple acquisitions to become a design and graphic production powerhouse that creates entire graphic-branded environments. Projects include trade show exhibits, event spaces, office environments, and retail stores. The company’s marketing leaves no doubt that its global presence is critical to its value proposition, and this latest acquisition was based on its location.

Equipment & Wide-Format Supply Distributors

There was one deal involving a distributor of wide-format supplies in 2023, the acquisition of TubeliteDenco by Grimco. This was two fewer than in 2022, consistent with the general decline in M&A activity. In equipment, Durst acquired Aleph, the inkjet fabric printing company located in Como, Italy, the fashion center for textile design and applications. Aleph’s direct-to-fabric inkjet machines produce printed textiles for apparel, soft signage, and home décor products. The company specializes in developing machines that use water-based graphic pigment inks with less environmental impact.

Roland DG, headquartered in Japan, acquired a majority position in UAB Dimense Print. The acquired company, located in Lithuania, has developed a unique digital printing embossing solution, primarily for the wallpaper industry.

Wide-Format Challenges

Year after year, we find very few distressed transactions and bankruptcy filings in the wide-format segment. We found only two bankruptcy filings in 2023 in the broadly-defined wide-format segment. Both were small companies; one was a screen printing and embroidery company, and the other was a sign printing company offering primarily yard signs. We found one non-bankruptcy closure, and that was a small screen printing company that had yet to make the transition to digital.

Looking Forward

The trends we have discussed over the past several years are still all in play. Franchise systems and many others now sell wide-format printed products online, and have systemized and captured the low end of the market. Digital wide-format printing equipment is now more affordable at all levels of quality. Printers can now print on just about any substrate you can imagine. Computer-driven flatbed cutters and routers are now ubiquitous must-have devices installed in any serious wide-format shop. Overall, industry capacity continues to increase as commercial printing companies add wide-format printing capabilities. These factors are all still valid and will put pricing pressure on companies that need to differentiate via product specialization or uniquely serve a well-defined vertical market.

Last year, we expected that the robust M&A activity in the wide-format segment we saw in 2022 would continue unabated. That did not happen. As noted above, the level of M&A activity in the overall market, particularly in our industry, was significantly lower than last year. The number of M&A transactions in the wide-format segment, broadly defined, was off by an even greater factor than the whole.

While each company has its reasons for moving ahead with an acquisition strategy, we have noted some trends that kept sellers out of the market, which had an impact on the M&A activity. 2023 saw the end of the post-COVID surge in demand, a rebalancing of the supply chain, the wind-down of the COVID government stimulus programs, and finally a yearning by older owners to conquer more challenges internally before cashing out. All these factors helped reduce the number of deals, especially in the second
half of 2023.

As the wide-format printing industry continues to mature, the factors that were the basis for many of the deals in 2023 will likely roll into the 2024 market. Commercial printing companies are back and seeking more opportunities to acquire companies to diversify via the convergence of print technologies and services. Geographic diversity will remain the reason for many acquisitions. Although the wide-format segment has been and remains very resilient, other factors will push the number of M&A transactions back up again. Sellers cannot stay on the sidelines forever. Owners will age out, and some will not have a next-generation family member eager to take over. Machines will wear out. The wide-format business is becoming more mature, and opportunities for rationalizing capacity via M&A transactions will increase.