To talk about the “print and promotional products industry” is to sell the industry massively short. It’s unfairly consolidating the many, many industries within the industry into one. And that idea — consolidation — plays into this: With so many facets of the print and promotional products industry galaxy — apparel, tech, drinkware, not to mention all of the types of print products available or even all of the subcategories of apparel, tech, and drinkware — true consolidation of the industry will be tough, despite the fact that you might see headlines of X distributor acquiring Y distributor. Or maybe R supplier joins up with S supplier to form T Brands Inc.
Things change, companies join other companies through partnerships or acquisitions. But the “consolidation issue” as some in the promotional and print industries might fear, where the industry is ruled by a small few monopolies, is likely impossible due to the diverse nature of the industry itself.
At least that’s what people like Randy Conley, president of Promo Consulting, Breckenridge, Colorado, thinks.
“Some may say, ‘Oh, these guys are getting too big,’” Conley says, “Our industry is still very fragmented. I’m not too worried about monopolization or things like that. I know some distributors may be a little fearful of that. ‘How am I going to be against the big guys?’ Things like that. The big guys, in general, it’s not like the airline industry where there are 10 guys that own 90% of the market. It’s not like that.”
Conley mentions 4imprint as an example. By both anecdotal evidence and actually looking at their revenue figures, 4imprint is one of, if not the biggest, name in promotional distributorships. And even still, Conley estimates they only take up maybe 10% of the market, making pure dominance on a scale of Boeing/Airbus impossible.
And Conley has some good perspective. He’s been in this industry for 40 years. After college, he started his own distributorship, where he worked for 18 years. After nearly two decades of selling products, he tried his hand on the consultant side, which gave way to a 13-year tenure at Facilisgroup as its vice president of business development. All the while, he continued consulting with distributors.
Facilisgroup has been active on the mergers and acquisitions front over the years, too, giving Conley a front-row seat to how distributors and suppliers can best navigate the waters — should they choose to.
Where The Money Is
Jim Anderson, founder and president of Corporate Development Associates, Scottsdale, Arizona, says there are really two types of consolidation.
“One could be simply the purchase of one company, whether it’s in the print space or the promo space, by another company,” he says. “The other kind of consolidation is when there’s a handful of companies that are literally gobbling up whole hoards of other companies. And I haven’t seen that as much on the print and promo side as we have in some segments of the printing industry, like the label industry for example.”
More on the label aspect of the print industry in a little bit. But, to focus on the type of consolidation that we’re seeing a lot right now, you’d have to go back a couple of years to the pandemic years and shortly thereafter.
“The history since COVID is interesting,” says Jamie Watson, COO/partner for Certified Marketing Consultants, Huntertown, Indiana. “We were smack in the middle of COVID, and everything that we were working on just ground to a halt. People were in emergency mode. So when you hit 2021, 2022 — especially 2022 — you saw a lot of that pent-up energy get released. And at that point, interest rates were still very low, so there was quite a bit of activity in 2022. As interest rates started to rise at the end of 2022 into 2023, we really saw that activity slow down because of the cost of capital, the cost of money, has a real effect on mergers and acquisitions. That’s pretty much keeping pace with all other industries. We’re just following about the same trend as global mergers and acquisitions go.”
In addition to Distributor X buying Distributor Y, there is private equity money coming into the industry, which furthers the belief that it’s consolidating quickly.
“That’s fueled acquisitions, of course, on the distributor side,” Conley says. “I don’t think it’s a bad thing. I think it’s a positive thing. I think for our industry as a whole, we’ve struggled maybe with professionalism. As an industry, we have a lot of mom-and-pop distributors perhaps. And what does that say about our industry? I think the industry has done a good job of raising the bar of promotional products and branded merch as a viable advertising medium.”
Big-money investments make it hard for someone to throw the “trinkets and trash” argument at distributors and suppliers. And on the print side, as technology rendered some products obsolete — or at least took a bite out of their demand — the idea of something like promotional products, once dubbed “trinkets and trash” became appealing. And one of the easiest ways for a print distributor or printer to get in on the promotional products side of the industry was to simply buy an existing, successful distributorship.
“The typical print distributor finally got it,” Anderson says. “And he started selling ‘trinkets and trash.’”
Watson feels the same, that private equity investment not only literally gives these companies more capabilities to operate, but boosts the reputation of the industry and marketing medium as a whole.
“I think people tend to sometimes look at consolidation, especially when it involves private equity money, as a bad thing,” she says. “I look at it as flattering to the industry if private equity sees opportunity here, because that’s a good thing. People want to inject their money into our industry. Those are people that are careful with what they’re doing with their money, and I tend to think that’s good for the industry in general when that money gets infused into our industry.”
Anderson has certainly noticed that a lot of big players in print and promo have private equity involvement.
“I would say that some of the larger distributors in the country are owned by private equity,” he says. “SupplyLogic WebbMason is a good example, which is a combination of about three large print distributorships, all of whom sell promo,” he says. “They are owned by private equity.”
But, he says, you can just as easily look at some of the most recognizable distributors in the game, and see companies that have long been owned by their founders or their families.
“For example, a couple come to mind right out of the top of my head: SmartSource, the Sourcing Group, American Solutions for Business, and Proforma, they’re four large distributorships within our industry, all of whom sell promo,” Anderson adds. “And all of them are still today owned by their owner-founders.”
So, that brings us to…
Where You’re Left
The consensus, it seems, is that consolidation is growing in the industry, to some extent. It’s growing, but it’s not a must for a distributor. And, while some distributors may want to grow their business to the point of appealing to a larger fish and then offloading or joining the company, that’s perfectly fine.
But it’s not the only outcome to remain successful. Not by a long shot.
There’s a quote often attributed to Abraham Lincoln: “Whatever you are, be a good one.”
For distributors, that means that, if you want to remain independent, it’s not only professionally acceptable, but downright advisable!
“There will always be room for the smaller distributor.” Anderson, who you will remember specializes in getting M&A deals across the finish line, says. “And I can define ‘smaller’ going all the way down to $1 million in sales. You’re not going to get [a private equity firm’s] attention unless your sales are $25 million. They just don’t want to look at a little company. There’s just too many problems. The financials are not in good shape when you’re that small. But I think there will always be room for small distributors because our industry — the printing industry — is set up very nicely to be able to be a distributor, and I don’t care whether you’re a label distributor, whether you’re a print on paper distributor, or whether you’re a pure promo products distributor — we have trade suppliers. There will always be distributors who can sell stuff, make a nice margin, make a nice living. And guess what: Those guys and gals who own that business, they don’t want to work for somebody else. They like to be their own person, their own boss, do whatever they want when they want.”
The tech age we live in allows for small distributors to have capabilities that were once resolved for major, big-time companies. We all have Space Age tech in our pockets, and programs available to us on our home computers.
What’s more, there’s undeniable appeal to many end-buyer clients in the company located right down the road.
“I think it’s also important to realize that not every end-user client needs what these big distributors offer,” Conley says. “There are lots of end-users out there who just need some branded merch for an event or something like that, and their local guy they have a relationship with, knows their business, and maybe is passionate about their cause or their business, is a perfect solution for them.”
Even if you’re not interested in acquiring or being acquired, there are still aspects of M&A culture to practice. While you might not be on the lookout for other companies to swallow up, you should still have that entrepreneurial eye.
“If you’re not doing organic mergers and acquisitions, and you’re just focusing on organic growth — and there are plenty of companies that do that — you just play your own game,” Watson says. “You grow. You still have to have a customer acquisition strategy, but you’re not buying companies. That customer acquisition strategy is key, because everybody loses customers through no fault of their own. You still have to have a way to continue to source new materials and develop leads, and that kind of thing. I think that’s the key to growth if you’re not looking at M&A. But the main thing is to play your own game and do what it is that makes your company unique and profitable and successful, not necessarily focusing on what others are doing.”
Where You’re Unique
For all of the talk about how the print industry is on the ropes, and how technology has rendered so much of it obsolete, Anderson says that there’s a good reason why so many modern print companies are not just being bought up, but being acquired through private equity investments. In other words, they’re getting cash injections and it’s not through charity.
That’s because the label segment is, in his words, technology-proof, and therefore something that private equity firms, promotional products businesses, and other printers see
as valuable.
“The label industry, over the last three years, has gone through a lot of the consolidation … where you have maybe 10 or 12 private equity firms who just seemed bent on gathering up as many labeling companies as they could and paying astronomical prices for them,” Anderson says. “We’ll have to see how that all plays out, but I will tell you one of the reasons for the label industry being so hot right now: It is far less subject to technological obsolescence than the print industry, certainly not so much so with promo. I’m not sure that promo products are ever going to be technologically obsolete, but the print side is.”
Again, these are not companies who throw their money around willy nilly. It needs to be a product with a promising future. And, despite all of the ways that print can become outdated in favor of tech, labels will always have a place, and that’s attractive to other businesses.
“Labels are a vital part of the printing industry, and they have been attractive to some of the private equity firms, because some of them got stung badly when they got involved in the print rollups, and then realized that a lot of their printing-type companies that they were buying were being technologically obsolesced,” Anderson says. “In the label world, let’s face it: The biggest single group of label-type products that everybody comes in contact with every day are food products. Just walk through a supermarket and you see all those labels that are on all kinds of stuff. Wine bottles and liquor bottles and whatever. I don’t see us technologically obsolescing that product line.”
He offers brochures as an example of a print product that once was ubiquitous, and now is something of a rarity compared to what it was.
“Years ago, everybody had a brochure,” Anderson adds.” Today they don’t have brochures. They put a PDF on their website and say, ‘Download it.’”
Anderson references his own adult kids, who still joke with him about printing out files when he could just download them and save them on his computer instead.
Which brings us to our final point about the consolidation trend in print and promo.
Where You Leave the Company
Anderson, who has been in the industry for decades, remembers something an old mentor told him when he was younger.
“When I first entered the world of M&A, one of the older guys that I used to listen to a lot who did what I do now — he was in his 60s at the time, and I was probably in my early 40s — he said, ‘Jim, if you run into a guy that’s 65 years old and he has not sold his business yet, he’s probably going to die at his desk,’” Anderson says.
He admits that this was a while ago, and the age has “probably crept up a little bit.” Being 65 and still owning and operating your business isn’t newsworthy anymore like it might have been in that day.
But Anderson’s point is that business owners need to have a plan in place for what happens to their business when they decide to leave it. And, in all likelihood, if they don’t have a plan for passing it down in the family, the answer might lie in private equity or another company acquiring.
“Sometimes a guy doesn’t have any kids in the business, but he might have a No. 2,” Anderson says. “He might have a No. 2 that maybe owns a small portion. The problem is that most employees don’t have the money to buy out a guy. If a guy’s got a $10 million business, and it’s maybe worth $4 million, let’s say. Most employees, even at the top management level, don’t have the kind of cash laying around that another company does or a private equity firm does.”
So, if you’re in a position where you’re thinking of selling your business, or perhaps buying another, Conley and Anderson both advise strongly that you work with someone who specializes in promo industry mergers and acquisitions. Otherwise, you risk having someone guide the deal who doesn’t understand the nuances of the industry and, therefore, the real value of the company.
“The biggest challenge we’ve probably gotten is people in the industry who don’t know what they’re doing and overpay for distributors, which is great for the distributor selling, but it does create challenges when other people go, ‘Oh, I want that deal,’ where there’s not that many people who don’t know what they’re doing and will overpay you,” Conley says. “I’ve got a deal right now where I’m not representing a client. It’s a consulting client of mine, and he’s got an investment banker throwing some pretty wild multiples at him, and I’ve told him, ‘You go for it. Let’s see an offer under those terms. Love it. You should take it real quick.’ Well this has been going on for months now, and I haven’t seen anything materialize.”
Conley adds that buying a distributorship is essentially buying a client list and staff list in the end. So buyers and sellers need to know what they’re getting into when entering into an M&A agreement in promo.
“You’re buying the sales staff and the clients, and that’s pretty volatile,” Conley says. “You’ve got your client database now, but what could it look like a year from now? You don’t know. So, you’re pretty much paid on performance in these deals with a little bit up front. And guys outside of the industry don’t always recognize that.”
Watson feels the same, recognizing that the print and promotional products industries are unique enough that enlisting the support of an expert is usually a good call.
“If you’re looking for somebody to buy your company, protect yourself by understanding what the value is,” Watson says. “Get a valuation, make sure that you get appropriate representation either from an M&A adviser or an attorney. Don’t ever sign a deal without that appropriate representation.”
With companies who specialize in helping distributors and suppliers through the mergers and acquisition process, you can rest assured that there’s someone with the right expertise and experience to guide you through whatever you want to do for your business.
And, if that means you just want to keep doing things the way you’re doing them now, that’s totally fine. As Conley, Watson, and Anderson say, consolidation is a trend in the industry, but it’s not the only way of doing business. At the end of the day, any company that buys a distributorship is buying the salespeople.
The distributor is the value to their customer.
