The consolidation of the printing and packaging industry continues to gain momentum as new financial players enter the field. New entrants, mostly private equity firms backed by multiple investors, typically enter an industry segment with an initial acquisition, a transaction that drives a stake in the ground, a deal announcing their intent to invest and grow a business in that specific sector. That first foray into the particular business segment is likely to be a company that is large enough and profitable enough to be used as a launching pad for future acquisitions. Building on that initial investment in the platform, investment firms aggressively pursue and complete multiple additional sequential acquisitions to expand their footprint in the target market.
This trend has been most evident and prevalent in the labels and flexible packaging segments where the PE-backed frenzy has, in recent years, reached a high point of activity. Multiple private equity buyers vying to build their platforms for significant seriousness in the market has led to sky-high purchase multiples for label printing companies, at least judged within the context of the value of overall label industry segments. printing and packaging.
As we have pointed out in previous Goal Reports, our expectation has been that PE-driven consolidators will be interested in other print-focused segments, especially folding box manufacturing. Like labels and flexible packaging, folding carton manufacturing is characterized by recurring revenue, strict color management, compliance with a variety of technical requirements related to the vertical industry served, and a constant proliferation of product extensions. brand that requires continuity of interaction with the customer. These features of the industry are attractive to private equity firms operating in the lower middle market, exactly at the level of many private family-owned folding carton companies.
Unlike labels and folding cartons, the level of M&A activity in commercial printing has been much lower for several years. Commercial printing is much more dependent on the ebb and flow of marketing budgets. In-house production in commercial print environments is characterized by the choppy pace of shop floor workflows. Commercial print has been and is increasingly challenged by the ongoing transition from marketing communications to electronic media. As a result of these factors, M&A activity and company values in the commercial print segment have lagged other print segments, with fewer competing buyers and lower purchase multiples. Critically, in today’s market-driven dynamic that is highly influenced by private capital, financial players have stayed on the sidelines and shunned the more general business segments of the printing industry.
There are signs of change. Several financial players have now emerged to sponsor major platforms within the general business segment. However, commercial print business owners should not confuse the emergence of a few select private equity funds in the segment with the strong market return and higher valuations that characterized the commercial print business market in the 1990s. . Private equity players entering the commercial print segment have mostly been very selective, acquiring successful and profitable companies with diverse service offerings including upstream creative services and multi-channel delivery of their client communications. Ordinary commercial printers do not need to apply.
Folding carton veterans back in the game
Industry icons Marc Shore and Dennis Kaltman are back and establishing a new platform company. Leaving no doubt about their intentions to be serious players as they return to the industry, the duo are heading up a new company, Max Solutions, with backing from private equity firm Jefferson Capital Partners. Shore and Kaltman worked together at Shorewood Packaging and were supported by Jefferson Capital Partners in the formation of Multi Packaging Solutions, a successful folding carton roll-up that was eventually sold to Westrock, the huge publicly traded paper and board manufacturing company. bag.
Instead of beginning with the acquisition of an existing production company, Max Solutions began by establishing two new manufacturing plants focused on the production of folding cartons and labels for the consumer and healthcare markets. The first plant to open, a 100,000-square-foot facility in Bristol, Pennsylvania, began operations in July. The second, also a new plant, is a 150,000-square-foot factory in Concord, North Carolina, and is scheduled to open this month.
The company announced its first acquisition, the purchase of Ellis Group, Canada’s largest family owned and operated folding carton company. The acquired company operates three facilities in the Toronto region. In addition to sheet-fed offset capabilities, the company uses web-fed flexographic presses designed specifically for high-volume folding carton production.
Another entrant in the competition to consolidate the folding carton market is GPA Global, with financial backing from Sweden-based private equity firm EQT Partners. GPA Global has built a network of folding carton plants, in addition to the company’s core sourcing expertise, which includes plants in Poland, Ireland, the UK, as well as US-based factories in Massachusetts and California ( watch GPA Global Emerges As Packaging Consolidator: December 2021 M&A).
The PE-backed accumulation of Oliver Printing & Packaging, sponsored by Pfingsten Partners, recently traded in a secondary buyout from Tenex Capital. Pfingsten established the platform in 2016 with the purchase of Cleveland-area-based Oliver Printing, at the time a commercial printing company that had successfully transitioned a substantial portion of its business to folding carton production. Building on that initial foundation, Pfingsten acquired several folding carton companies, including Pohlig Packaging in Virginia, Boutwell Owens in Massachusetts, Professional Image in Oklahoma, and DISC Graphics in Hauppauge, New York, where the company is now headquartered.
Other PE-backed players consolidating the folding carton segment include Lewisburg printing platform Radial Equity Partners, Mill Rock Capital’s roll-up Mill Rock Packaging and Wellspring Capital’s Rohrer. (For more, see Label rolls are red hot; Are folding cartons the following? – March 2022).
Commercial Print Roll-Up Redux (Marketing Production Providers)
DCG One, based in Seattle, Washington, acquired Corporate Communications Group (CCG), based in Upper Marlboro, Maryland. In particular, DCG One bills itself as a “marketing services organization” and described its acquisition target as an “integrated direct marketing and commercial printing company.” While neither company shies away from promoting its roots in the printing industry, both DCG One and CCG clearly present their printing capabilities within the framework of a wide range of capabilities. In addition to printing, the combined organization offers strategic marketing, creative design services, web design, wide format printing, promotional products, digital media marketing, fulfillment, direct mail services and of course printing.
DCG One has been supported by Clavis Capital Partners and Dobbs Management Service since January 2020. The transformation into a marketing services provider was underway at the time of purchase and was later accelerated by the acquisition of Garrigan Lyman Group, a branding and digital advertising. agency with offices in Seattle and New York.
Post Capital Partners, a private equity fund that focuses on its trust and belief in a seasoned executive leadership team first, and only then will invest in a specific industry, continued its support of the Ironmark team, with the acquisition of Millenium Marketing Solutions.* Headquartered in Annapolis Junction, Maryland, Ironmark presents a comprehensive value proposition to its customers. Dubbed an “Imaging Company,” Ironmark offers creative services, website design, database integrations, search engine optimization, web-to-print, digital media marketing, fulfillment and, yes, printing. . (watch Commercial Printing Wakes Up From M&A Dream: June 2022).
The acquired company, Millennium Marketing Solutions, is also based in Annapolis Junction and over time grew from a small print shop to a full-service marketing company. Areas of expertise include digital marketing, web design, graphic design, promotional products, signage, and of course printing.
The tags are still the Division One segment
Labels continue to be the most sought after segment, as measured by the number of private equity consolidators that have been vying for the small number of suitable independent label printing companies that remain in the lower middle market.
Fortis Solutions Group announced the acquisition of digital dogma, a label printing company based in Santa Fe Springs, California. Fortis is now backed by Harvest Partners, which acquired the business in a secondary purchase of Main Post Partners in October 2021. Fortis has grown through the acquisition of a small pressure-sensitive label printing business in Virginia Beach. a national manufacturer of multi-product packaging with more than 1,300 employees in twenty-two plants.
Other private equity players active in the label segment include Incline Equity with platform company NovaVision, Quad-C Management with Catapult Print and Packaging, Dunes Point Capital with Premium Label & Packaging, Sole Source Capital with Peak Technologies, Genstar Capital with Brook + Whittle, Heartwood partners with All American Label & Packaging, Morgan Stanley Capital with AWT Labels & Packaging, Sole Source Capital with ID Images, and Ares Management with Resource Label Group. And that is just the list of PE-backed platforms active in the tag segment that have announced transactions in the first nine months of 2022!
* Graphic Arts Advisors, publisher of The target reportserved as exclusive advisor to Millennium Marketing Solutions in this transaction.