Private Equity Feeds Industry Growth – December 2022 M&A Activity

Not a month goes by in which private equity does not have a significant impact on the printing, packaging, and graphic communication businesses. The smart money keeps on coming, as fund after fund establishes a position in the industry with a new platform investment, and soon thereafter embarks on an aggressive roll-up campaign. Initially limited to primarily packaging companies, some private equity firms have eschewed the high multiples that top performing packaging companies command, investing instead in the commercial printing industry or other specialty segments such as wide-format products, or book printing. Funds are backing direct mail printing companies and then layering on data analytics, programmatic digital advertising, email campaigns, and other integrated marketing services.

In addition to growing their platform companies via bolt-on acquisitions, most PE firms will also seek to juice up internal performance and organic growth. Many funds will professionalize the new platform company with an upgrade to the accounting system and improved reporting standards. Critical to growth, funds will judiciously water the company with new capital equipment investments that are needed. Private equity will bring a disciplined and structured approach to the management of the operations.

Some private equity firms have a long-term vision, a build-and-hold strategy; however, that is the exception. Most have obtained their funding from limited partners to whom they have committed a return of the initial investment plus a superior return, all within a predetermined time frame. With the clock ticking on when the return of capital is required, the funds eventually must find a buyer and exit their investment. Hence, we see secondary, and even tertiary, buyouts, in which one fund sells its platform company to another private equity fund. The process begins anew, and the roll-up continues.