Uncertainty Rules the Day
Over the past 14 years, we have chronicled, logged, and commented on the merger and acquisition activity in several print-centric business segments, with a special focus on commercial printing, packaging (including labels, folding cartons, and flexible packaging), wide-format, and direct mail companies. At the end of August each year, rather than focusing on the prior month’s deal activity, we take a look back at the past 12 months. If past is prologue, and to a reasonable extent we believe it is, then we hope to provide a high-level macro perspective on what the deal activity tells us about where the industry is headed. Which segments have experienced more or less deal activity? What are the trends in the buyers’ rationale to complete these acquisitions? Are acquirers adding facilities to their networks, or opportunistically folding acquisitions into their existing facilities? What does all this tell us about the potential future transactional activity within each print segment?
In purely numeric M&A terms, deal activity during the past 12 months was essentially the same as in the prior TTM period, with a 1.1% increase. However, this is still 12.4% off the peak number we logged in the 2022 post-Covid boom year. We identified 191 transactions of interest during the past twelve months, close to the lowest number we have tracked in any period since we began publishing our annual reviews in the autumn of 2016.
Last year at this time, it appeared that the economy, and therefore by extension the printing and packaging segments, might navigate the turbulence and nail the elusive soft landing. As it played out, the U.S. economy managed to do so incredibly well, with moderately higher interest rates, in historical terms, slowly dampening the stimulus-induced inflation. As we headed into autumn 2024, we noted some bumps on the landing runway, indicating that not all was well. With autumn approaching, the economic plane has landed, and troubling signs appear in the M&A data from the last 12 months. The economy appears to be grounded, and business owners are not sure which runway will lead to a smooth takeoff.
The data noted below about bankruptcy filings and non-bankruptcy plant closings indicate that the ride has been increasingly bumpy, at least for some. (We dig into this more deeply below and point out the particularly hard-hit segments.) At Graphic Arts Advisors (GAA), we hear from many owners on a regular basis, and while inferences from these conversations are anecdotal, we hear that there is a softening of demand across many graphic segments. At GAA, in our special situations practice, which assists owners of financially challenged companies, from moderately to highly distressed, inquiries have increased significantly in the past several months.
We are often asked what time of the year the best time is to go to market, and when buyers are likely to close on deals. Historically, deal activity tends to drop off every year as we head into the summer months. This year was no exception. Although deal activity was steady overall on a year-to-date basis, the three-month trailing analysis of the number of deal announcements by month shows that transactions have steadily declined from a peak in January, reaching their low in July and August.
Read the full feature on Printing Impressions.
