Wide-Format M&A Trends

With so much going on in wide-format mergers and acquisitions, now is a good time to take a closer look at the trends driving the space and what to expect in the coming months. We sat down with Mark Hahn, senior managing director and founder, Graphic Arts Advisors, to get his perspective on what wide-format printers need to know about M&A activity.

Mark Hahn

Looking at the M&A activity you’ve seen this year, what would you say are a couple of overarching trends in the wide-format space?

Hahn: One trend we’re seeing is that the number of tuck-ins — where the book of business is moved to the buyer’s plant — has increased greatly in the past year. This is because the wide-format segment generally is maturing, so there’s more competition, increased margin pressure, less expensive equipment is widely available, and differentiation happening, particularly over the past few years. Also, we have people who entered at the start of the digital wide-format era who are now looking to exit. We’re also seeing that the number of transactions went up — and a geographic aspect is involved. Several buyers say they want to expand geographically. Finally, we saw an increase in non-bankruptcy plant closures, which is something we’ve not seen before in the wide-format segment.

As the wide-format segment has become more saturated, do you still see wide-format businesses as being strong attractive acquisitions for, say, commercial printers?

Hahn: Yes. Similar to what we see in commercial, the more differentiated a wide-format business is, the more attractive they will be. If they’ve figured out how to serve a niche market — event graphics for instance — then they may be really good at what they do. Another example would be a company doing installations, urban installations, or managing the process. That’s niche expertise. Also, scale and profit remain a strong factor.

To what degree do you see the effects of industry convergence as driving either mergers or acquisitions in the wide-format space?

Hahn: It’s been critical, and it’s one of the reasons commercial printers are looking for more profitable segments. Another example we’ve seen is the convergence between the reprographic and wide-format spaces. Convergence is blending what were previously distinct segments.

How do you see the transition to a new Presidential administration affecting print industry M&A activities in the near term?

Hahn: We have had one transaction that was not completed — the offer was withdrawn — based upon the election, based on the belief that economic conditions will be unsettled. Another shop cited the election for a dramatic decrease in mail volumes and inquiries over the last week, though others are seeing an increase. It’s similar to COVID — the change is likely to impact companies differently based on the clients they serve. Regarding tariffs, they look to be highly inflationary. That’s what I’ve read. Immigration policy may also have a significant effect. The labor outlook seems to have improved, but that could change.

For companies looking to acquire or be acquired in the next year, what is one thing they can do today to better ensure that quest?

Hahn: It’s different on the two sides [of the transaction]. If you want to acquire, you need to have clear goals, a strong balance sheet, have your team in place, and engage a transactional attorney. For companies on the sell side, it’s important to have solid profits, strong revenue, and not have problematic sales concentration. Disciplined and consistent financial reporting is very important on the sell-side.