Stronger together
Increasing market share, gaining skilled workers and experienced teams, and increasing revenue are all reasons a business could decide to either sell or buy another company.
Completing a merger or acquisition can also require a lot of resources and knowledge and of course use up a great deal of funds. However, if done in the right way for your business they can also lead to great rewards.
As the industry stabilises after a rocky few years, we take a look at some of the mergers and acquisitions that have taken place over the past year and the reasons for these.
Room to grow
Marktlink is an independent mergers and acquisitions (M&A) advisory firm that boasts over 25 years’ experience helping businesses through the process of mergers and acquisitions. Over the last year, the company advised over 120 transactions across a range of sectors.
Jonny Parkinson, managing partner of the company says the benefits of a merger or acquisition can differ on a case-by-case basis. This is because the benefits to a seller will be different to the buyer. The benefits will also vary depending on whether the seller is a sole entrepreneur or a multi-partner owner. However, generally, he says mergers and acquisitions open up businesses to a variety of avenues for growth and also get rid of barriers that could be stopping business owners from achieving strategic goals.
Jonny Parkinson, managing partner of mergers and acquisitions advisory firm, Marktlink UK
One benefit Parkinson notes is the opportunity to gain market share which in turn gives a business more of an influence and the chance to increase profits. Alongside this, a merger or acquisition can also allow a company to enter new markets, open the doors to new customers, acquire new products and solutions, and also expand into new regions.
There are a number of reasons a merger or acquisition could benefit a business
“Following a merger, the greater size of the business also improves the economies of scale for a business, which now boasts greater negotiating power as a larger company when dealing with customers and suppliers,” Parkinson explains.
“Ultimately, one of the key factors for businesses looking to engage in M&A is the financial returns that the company can see as a result. The benefits mentioned provide commercial and operational
synergies that, if exercised successfully, will drive an increase in revenue and profits.”
Ultimately, one of the key factors for businesses looking to engage in M&A is the financial returns that the company can see as a result”
One company that recently completed an acquisition in a move that will see it expand its integrated inkjet solutions presence in Europe is Fujifilm. The company acquired UNIGRAPHICA AG in order to strengthen its Integrated Inkjet Solutions offering globally.
The company has worked with the European inkjet system integrator for a number of years and as a result of the acquisition, UNIGRAPHICA AG has become a wholly owned subsidiary of Fujifilm and has been rebranded as FUJIFILM Unigraphica AG.
Founded in North America 15 years ago, FUJIFILM Integrated Inkjet Solutions is a service within Fujifilm that provides custom inkjet systems across the EMEA region and Japan for brands in markets such as commercial imprinting. With its head office based in the Principality of Liechtenstein, the location of Unigraphica AG was something that appealed to Fujifilm, as well as its long history within the print industry and its network and reputation.
Greg Balch, vice president and general manager of FUJIFILM Integrated Inkjet Solutions explains that this is because as FUJIFILM Integrated Inkjet Solutions has been implementing its strategic growth plan, it has been clear that there would be benefits from a more localised presence in Europe. Not from a sales standpoint, but from an integration capability, manufacturing, and aftersales support viewpoint.
In addition to this, Balch explains that there are a number of complimentary technologies between the two companies. One example is that Unigraphica AG brings transport knowledge in terms of web-to-web, sheet-to-sheet, web-to-sheet, and finishing capability knowledge. On the reverse, Fujifilm can offer Unigraphica AG the stability of a larger company so when there’s opportunity to scale, it can enable this.
“We’re just really excited about the combination of the two teams,” Balch says, adding: “We’ve worked with Unigraphica as a partner for an extended period of time now so we know them and they know us. We believe there’s a really strong fit between the companies and we can’t wait to get started.
“We’re thrilled to have the knowledge, expertise, and strong reputation of Joseph Schweiger and the entire Unigraphica team joining us. I am confident that this addition will support and accelerate our business expansion.”
Joseph Schweiger, chief executive officer of Unigraphica, adds: “Through this acquisition, Unigraphica’s services will be strengthened with Fujifilm’s portfolio of inkjet printing technology. We are excited about the additional resources and the access to new inkjet printing solutions that Unigraphica can provide to customers by joining the Fujifilm group.”
Fresh experience and skills
Paragon Customer Communications is another company that has completed a couple of acquisitions in the past year. Back in April the provider of digital customer communications announced its acquisition of Williams Lea CCM – the customer communications division of Williams Lea Tag Group. As a result of the acquisition, Williams Lea CCM, which has 425 UK-based employees and an annual turnover of around £40m, became part of the PCC UK, Ireland and Luxembourg business.
According to Paragon, the decision to acquire Williams Lea CCM was part of its strategy to acquire complementary businesses to increase its capabilities, talent, and market share. Geographical expansion was also a selling point as Williams Lea CCM offered locations in Normanton, Norwich, and Loughborough, enabling Paragon to strengthen its customer communications offering.
Williams Lea CCM’s existing team was brought over to Paragon bringing with it a track record of working with high-profile clients from the financial services, legal, and professional service sectors such as Virgin Money and Capital One. The acquisition will open doors for Paragon to work with these new clients.
Jeremy Walters, chief executive officer of Paragon Customer Communications UK, Ireland and Luxembourg, comments: “This acquisition strengthens our position as one of the most trusted and reliable service providers in the customer communications market, and further consolidates our position as a technology-enabled international business services group.
Jeremy Walters, chief executive officer of Paragon Customer Communications UK, Ireland and Luxembourg
“As we’ve got to know the team at Williams Lea CCM, we have been impressed with their approach to client management and service deliver, so I’m delighted to welcome 425 new colleagues to our business.”
We have been impressed with their approach to client management and service deliver, so I’m delighted to welcome 425 new colleagues to our business”
In June, Paragon also announced that it had acquired print and direct mail company The Lettershop Group in a move that will enable it to expand its direct mail and packaging portfolio. As a result of the acquisition, The Lettershop Group’s 142 UK-based employees have become part of Paragon Customer Communications UK, Ireland and Luxembourg.
Walters adds: “We’re delighted to welcome The Lettershop Group and our new colleagues to Paragon. Its industry knowledge, expertise, and dedication to its customers will help to strengthen our position within an evolving market, and we are thrilled to begin working with its 142 committed staff members.”
Also taking place in June was Denmaur Independent Papers’ acquisition of the business and assets of the Fine Paper and Conversion division of Middleton Paper Company. Middleton’s staff will remain at their location in Walsall and the Middleton brands will remain unchanged following the change of ownership. This move marks the first acquisition for Denmaur since its chairman Harry E Gould Jr. took a majority shareholding in the company back in 2019.
In June, Denmaur Independent Papers acquired the business and assets of the Fine Paper and Conversion division of Middleton Paper Company
Much like the benefits outlined by Parkinson, Gould explains that whilst Middleton has a slightly different business model than Denmaur, the combined strengths and differences of the two organisations will result in added value to the UK paper and board market.
Founded in 1983, Denmaur has established itself as a trusted UK paper merchant which specialises in supplying to publishing, commercial print, and carton board sectors. The company has also made a name for itself as a sustainable business having recently achieved a landmark 100,000 tonnes of Carbon Balanced Paper sales. Middleton on the other hand is known for its conversion services to the graphic paper and board market and added a merchanting arm in the form of Vision in recent years.
Mike Gee, chief executive officer of Denmaur explains how this acquisition takes him back to before Denmaur was founded and he worked alongside Jean Stanley at M6 Paper. “M6 Paper was then a very successful merchanting and conversion company. Jean is now part of the Denmaur team and will no doubt share our excitement of sales and conversion coming together.”
Nick Gee, managing director of Denmaur, adds that despite perhaps having differing business models, both companies share the ethos of a family-owned business and respect for its employees – something he says has been instrumental to the success of both companies. “The acquisition adds another facet to our business, allowing us to provide paper and board to our customer base with short lead times,” he says.
“We have worked with Middleton for many years and recognise the quality of the conversion services they offer. It is a perfect fit that will enable us to provide a further enhanced service package to both our and their customer base.”
Seek professional advice
We’ve looked at some examples of recent acquisitions within the industry and the benefits these will give to the parties involved. But what if you are thinking of buying a business or selling your own but don’t know where to start or the steps involved? Look no further, as Parkinson has offered some words of advice.
In terms of some of the main considerations businesses need to take when considering a merger or acquisition, Parkinson says it is important to assess whether you have the capacity, both operationally and financially. Identifying what synergies can be leveraged in these areas can reduce costs and make the process smoother.
In addition to this, Parkinson says the deal value and structure can be a very important factor in order to make sure financial returns are protected throughout the process. In this case, working with an experienced adviser can help to bridge gaps between buyer and seller valuations.
“For example, mechanics such as ‘deferred consideration’ which is when an agreed amount is paid after the completion of the deal,” Parkinson says, adding: “Or another example might be earn-outs where business performance after the deal can lead to additional payments which mitigates any potential risk of the business underperforming.”
Parkinson highlights that there are a number of finance providers available which could be another option for businesses to consider. An experienced adviser can also support with legal issues and tax legislation using their own contacts and knowledge.
O Factoid: According
to the Office for National Statistics, domestic merger and acquisitions
(UK companies acquiring other UK companies) was valued at £4bn in Q1
2022 O
Completing a serious business move such as a merger or acquisition doesn’t come without challenges and road blocks. One area that Parkinson says shouldn’t be overestimated is a synergy, where businesses engaged in a merger and acquisition merge parts of the two businesses in order to streamline the process.
“We often see that it can sometimes be harder to realise synergies than were originally expected. Acquire a business because it’s a good business and see possible synergies that can be realised as an added bonus.”
Another area that can cause challenges is making sure the two businesses that are merging have company values that align. Parkinson warns that if one company tries to change the way a pre-existing organisation works or how the employees operate, you could risk losing staff and “uprooting the fabric” of the business which has been operating successfully prior to the new move.
“More often than not, you are buying a business that is successful, so ensure you retain what makes it successful,” Parkinson says, adding: “Trying to change too much too soon can upset this and mean you inherit a very different business to the one you identified.
One of the key factors for businesses looking to engage in M&A is the financial returns that the company can see as a result
“Mergers and acquisitions can be an excellent strategy for growing your business, if done correctly. However, taking the right advice can be crucial in structuring transactions and integrating them correctly to ensure the expected benefits can be realised.”
As the industry continues to strengthen and stabilise following the challenges of the global pandemic, Brexit, supply issues, cost rises, and the war in Ukraine, Parkinson offers a final word: “Despite current economic challenges and uncertainties, the mergers and acquisition market remains really strong and very competitive, with plenty of options to assess finance for an acquisition, which you can expect to continue to support a relatively buoyant mergers and acquisitions market.”
With this in mind, a merger or acquisition could be the right next move to ensure your business continues to grow and capitalise on booming markets, with a strong and committed team behind you.
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