Author Archives: Mark Hahn

About Mark Hahn

Mark Hahn is a Managing Director and Founder of Graphic Arts Advisors, a boutique strategic financial advisory and consulting firm focused exclusively on the printing, packaging and related industries. He assists company owners and management, as well as their lenders, investors and shareholders in the following areas: mergers & acquisitions, sale of business, strategic and financial advisory, capital structure & funding, financial analysis, interim & turnaround C-level management and business valuations. Mark is the author of The Target Report and is regularly published and quoted in printing industry trade and management journals. Mark can be reached at 973-588-7399 ormark@graphicartsadvisors.com.

It’s Academic – Scholarly Journals are Big Business

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Digital content platforms attracted financial and strategic buyers last month, as increasingly sophisticated online systems drive information to centralized providers that automate the design, hosting and distribution of content. That content may or may not be printed, and often times will be printed only on-demand as the final consumer sees fit for their needs.

Academic journals caught the interest of private equity investor Accel-KKR, which acquired a majority interest in HighWire Press. HighWire, formerly a venture of Stanford University, has been spun off and launched into the competitive world of PE-backed companies. HighWire provides an open electronic platform for universities and other publishers of scholarly journals to develop and host their academic journals. Long noted for high page counts and short runs, academic journals were a natural and early adopter of online publishing. Notably, there is no actual printing press at HighWire Press and the content managed on its platform is delivered in digital form.

Across the country at another august institution, Princeton University, the ripple effect is being felt, with the announcement last month that the California Princeton Fulfillment Services, publisher and distributor of about 340 books for Princeton University, will be winding down and closing by this time next year. As the investment in digital publishing platforms continues to improve the management and delivery of online content, Princeton University Press has decided to outsource the hosting and fulfillment of publications to Perseus Distribution Services. Perseus boasts its own digital distribution services, linked to short run and print-on-demand partners, as well as over a million square feet for warehousing pre-printed books. The partner in the Princeton operation, The University of California Press, will be moving its digital journal content over to HighWire.

Two trends evident from recent transactions appear unrelated at first, but may in fact be connected, as larger companies invest in sophisticated customer-facing software platforms, and draw business away from the small mom-and-pop shops. Staples, the national chain of office supply retailers, acquired PNI Digital Media, a provider of digital print software that provides easy online ordering of consumer and corporate printed products. This follows on the heels of other recent transactions in the web-to-print space, such as Vistaprint’s acquisition of Pixartprinting last month. Over the past couple months, we have noticed an increase in the number of small local commercial printing and copying centers that filed for liquidation under Chapter 7; we found six that filed in May. This is in addition to an unknown number of small printing company owners that just gave, up, closed the door and walked away without the expense of actually filing bankruptcy. I expect that we’ll see more closures of independent small print/copy shops, driven in part by the increasing ease with which customers can go online and purchase their printing.

The buyer of the Boston Globe and the Telegram & Gazette, acquired last August in the spin-off from The New York Times, sold off the Telegram & Gazette which serves the mid region of Massachusetts. The buyer was Halifax Media, backed by PE firms Stephens Capital Partners and Redding Investments. In a twist of fate, the sale to Halifax brings former corporate cousins back under the same management, since Halifax had previously purchased and still owns the former New York Times Regional Media Group which consists of newspapers primarily located in the southeast US.

In another newspaper industry transaction, the Baltimore Sun Media Group announced that it is acquiring The Annapolis Capital and other local papers in Maryland. The Baltimore Sun Media Group is likely to find itself as the target in the near future, as it is owned by the Tribune Co., which also owns the Chicago Tribune and the Los Angeles Times and has announced that it plans to divest its portfolio of newspapers.

Wide format printers were targets in several deals in May, including the acquisition of wide format franchisor Speedpro Imaging in a deal backed by private equity investor Fairfield-Maxwell. The Garvey Group which as we reported in July 2013 acquired the western wide format division of Schawk, continued its growth by acquisition strategy with the purchase of retail display and wide format specialist Troyk Printing located in Franklin, Michigan. Industry behemoth RR Donnelley acquired the relatively tiny True Colors, a wide format shop in Vancouver, British Columbia.

It’s About TIME

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The newest old company, Time Inc., was very busy in June. The venerable publisher of magazines, including household names such as Time, Fortune, People, and Sports Illustrated, was spun off from Time Warner, separating the aging print-centric parent from its progeny’s profitable entertainment and programming businesses. As its retirement gift, the new Time Inc. has been saddled with $1.3 billion of debt, as well as responsibility for a group of underperforming British magazines. With more than 90 titles in print, Time Inc. is challenged by the continuing and steady decline in magazine circulation which in turn has driven revenue down for 22 of the last 24 quarters.

Prompted by Time Inc.’s decision to cut off shipment of its magazines, magazine wholesaler Source Interlink Distribution filed Chapter 11 bankruptcy in June, announcing that the company will cease operations. Time Inc. apparently had good reason to withhold further shipments, reporting that it will be unable to collect $26 million due from Source Interlink. As Time Inc. switches to another distributor, it will likely lose sales and possibly readership loyalty as its newsstand slots sit empty for up to 12 weeks.

Time Inc. wasted no time in diversifying away from the legacy print business, announcing on June 2nd that it was acquiring Cozi. The Seattle-based company is a purely digital company that offers a mobile app and website that families use to coordinate shopping, schedules and to-do lists. No print involved.

Time Inc. wrapped up the month by divesting its Latin-American subsidiary, magazine publisher Grupo Expansión. Headquartered in Mexico City, with 16 titles in print, the company was purchased by Southern Cross Group, a private equity firm with investments throughout Central and South America.

In my recent article in NAPL’s new publication, Bottom Line, “M&A: Still a Buyer’s Market?” I postulated that the market for commercial printing companies is improving and smart buyers with well-defined strategies are returning to the market, and that we may be at an inflection point between a buyer’s and seller’s market. Recent transactions suggest that acquirers of companies in the commercial printing segment may be less reliant on the “tuck-in” growth strategy, in which a healthy commercial printer picks up the sales of a distressed printer on a pure earnout basis, leaving the seller to close down operations and sell off the excess equipment.

In a transaction that appears more strategic than predatory, two commercial printing/mailing companies in the Seattle area with combined revenues in excess of $50 million, DCG West and CCS Printing, announced that they are joining forces, moving into a new 140,000 square-foot facility, and re-branding the new entity as DCG ONE. In another separate transaction in the Pacific Northwest region, Wright Business Graphics, based in Portland, Oregon acquired Sunset Press in Kent, Washington. Both companies sell only to the trade, and the combined operations reportedly will have $55 million in revenues.

Despite recent positive signs in the commercial printing segment, the “tuck-in” is not completely dead, and commercial printing companies continue to seek out opportunities to absorb the sales of smaller companies. Cedar Graphics in Hiawatha, Iowa tucked-in the sales of local competitor The Brandt Company which itself ceased operations. In a deal put together by my firm, the NAPL Business Advisory Group, J.S. McCarthy of Augusta, Maine, purchased the customer base and certain assets of Printech, a commercial printer located in Stamford, Connecticut.

Block Communications shuttered two downtown newspaper print operations. The company’s Pittsburgh Post-Gazette will be printed at a newly leased 245,000 square-foot facility outfitted with new printing equipment. Block’s Ohio paper, The Blade of Toledo, will be outsourced to a yet-to-be-announced more efficient plant that is within distance to meet the daily schedule, consistent with the trend occurring throughout the newspaper industry. Phoenix Media Communications in Boston announced the closure of newspaper and circular printer Mass Web Printing in Auburn, Massachusetts. The Seventh-day Adventist church is closing its Hagerstown, Maryland printing company, transferring the printing to its west coast printing operation in Nampa, Idaho.

The Free Lance-Star in Fredericksburg, Virginia, is back on our deal log, now exiting its Chapter 11 bankruptcy in a 363 asset sale to distressed debt fund Sandton Capital Partners. In addition to the paper and radio stations, the purchase included the Print Innovators division which prints the newspaper, circulars and commercial printing products.

You can find The Target Report at http://targetreport.blogspot.com with the complete deal logs and links to sources.