Challenges and Opportunities: Hardware versus Software – June 2025 M&A Activity

SOURCE - The Target Report

Recent deal activity and distress filings draw a clear line of demarcation through institutional investors’ view of the current printing and packaging landscape. The market continues to reward software-driven, workflow-focused businesses, while hardware-centric ventures face the constraints of tighter capital equipment budgets, long-term planning timeframes, scale needed to manufacture high-tech equipment, and service staff requirements that challenge even the most innovative companies.

Software and Workflow: Sticky, Scalable, Recurring, and Attractive

Private equity and strategic buyers remain hungry for platforms that keep print profitable and operate behind the scenes. Vista Equity Partners’ acquisition of Amtech Software, a packaging industry MIS provider, underscores the appeal: mission-critical, recurring-revenue software that sticks with converters for years, often decades. While the Amtech name may not be well-known to many readers of The Target Report, for those in the label printing and converting business, the company’s Label Traxx software system is likely familiar. Amtech is the developer of the EnCore ERP system for corrugated and folding carton manufacturing, as well as the Axiom software program for sheeting operations.

Amtech is a classic example of the most common PE-backed strategy: acquiring a privately held family business, adding related “bolt-on” businesses that enhance depth within a specific market to build value, and then exiting through a sale to another PE firm that will continue the growth. Amtech, based in Fort Washington, Pennsylvania, was founded in 1981 and remained a family-owned company until August 2021, when it was acquired by its first institutional investor, Peak Rock Capital. Changes to the Amtech platform completed under Peak Rock’s ownership include the acquisition of Label Traxx in April 2024, the expansion of the company into new geographic markets, and, critically, converting the company’s offerings to a recurring subscription model. What could be better? Recurring revenue from an industry, packaging, that is itself attractive to financial investors due to its recurring nature.

Print Eps (eProductivity Software) snapped up Avanti Systems from Ricoh. It’s another sign that the Management Information System (MIS) and Enterprise Resource Planning (ERP) layers of the industry continue to consolidate under technology specialists who know how to drive margins by building scale via the acquisition of competitive systems, cross-selling into preferred platforms, and cementing recurring revenue relationships with customers.

Avanti, an early adopter of full cloud-based deployment, was acquired by Ricoh in 2017. It was another one of those head-scratching strategies in which print equipment manufacturers jump into the MIS/ERP software world, reminiscent of EFI’s acquisition of and long-term effort to integrate the Printcafe collection of legacy print-MIS system companies. Eventually, EFI decided to focus on its Vutek, Reggiani, Cretaprint, and Nozomi equipment lines, and in 2022, spun out its MIS software division in a sale to PE firm Symphony Technology Group

Ricoh, like EFI, eventually realized that its goal to integrate business management software with its machine-based workflow was misguided. In the sometimes circular world of M&A transactions, Avanti ends up back in the fold with the former EFI-owned suite of print MIS software offerings.

Disruptive Hardware-Centric Ventures: Capital Hungry and Vulnerable

In stark contrast, innovative hardware-centric ventures are currently showing deep cracks.

Landa Digital Printing, the high-profile Israeli-based press innovator, filed for insolvency with reported debts of $516 million and assets of only $127 million (excluding the potential value of its intellectual property). Founded by Benny Landa, the visionary inventor and entrepreneur behind the development and launch of the revolutionary Indigo line of digital printing machines, the company spent over a decade developing its “nanographic” technology. Despite splashy launches and global demos, the expensive path from prototype to profitable installed base proved too long.

In 2021, with markets and print demand seemingly ready to rebound after the Covid lockdown, Landa Digital Printing was planning to merge with a SPAC (special purpose acquisition company, aka a “shell company”). At the time, press reports indicated that Landa was expecting the company to achieve a $2 billion valuation based on the money to be raised by the SPAC after the merger. As it turned out, that deal never materialized, and private investors continued to pour money into the company. Collectively, the private investors and secured creditors ponied up in excess of $1.3 billion, including more than $220 million from founder and master pitchman Benny Landa.

At its peak, Landa Digital Printing employed about 500 people, mainly in Israel. That number has declined with more layoffs to occur as part of the company’s restructuring efforts. The company has sustained losses every year since its founding in 2011. The company reported a loss of $148 million on sales of $35 million, and a loss of $164 million on sales of $59 million, in the years 2022 and 2023, respectively, the first years that machines were commercially available (alpha and beta test models have been out since 2017). Although results for 2024 have not been published, it appears that many of the 50 orders reportedly placed at Drupa 2024 have not materialized or have been substantially delayed, with only 11 of those orders reportedly fulfilled.

Nonetheless, Benny Landa is not someone to count out easily. He went through a very similar process with the introduction of Indigo printing technology and machines. The Indigo venture was quite dicey for several years, with layoffs and many, many complaints about the reliability of the machines. In 2002, HP made a strong commitment to the digital color printing business and acquired Indigo for $830 million. The sale to HP was not the home run that Landa wanted, with the amount paid by HP roughly equal to Indigo’s 1994 valuation when the company went public. However, given the state of the company at the time, it was considered a brilliant exit for Benny Landa and the investors. With HP’s support, world-class organization, and commitment to addressing quality issues, the Indigo line of presses went on to set the standard for high-fidelity digital-color production machines.

Landa’s fall into insolvency comes on the heels of another blow to the Israeli digital printing universe. Digital equipment maker Highcon Systems Ltd., in which Benny Landa has also invested, known for its game-changing digital die-cutting and creasing machines, filed for insolvency earlier this year. When Highcon was initially floated on the Tel Aviv Stock Exchange, it had a total market value of approximately $110 million. At the time of the insolvency filing in March, the market value had dropped to approximately $1.1 million, with only 20 employees remaining to maintain minimal operations. As of the date of this writing, the remnants of the company are still for sale under the supervision of the Israeli Insolvency Courts.

Both the Landa and Highcon collapses show just how unforgiving the economics of capital-intensive equipment can be when market adoption lags behind investors’ expectations. Innovative equipment manufacturers must fund costly installations, spare parts inventory, installation and service teams, and global demos for years before sales volumes reach sustainability. The time delay is simply a runway that is too long, and in the case of Landa and Highcon, exceeded the patience of their investors.

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