Hyding Out

5 Critical Factors for Successful Bankruptcy Reorganization of a Print and Graphics Communications Company

Although there are few examples of successful bankruptcy reorganization in the print and graphics communications industry, owners considering a restructuring of their highly leveraged company should not rule out chapter 11.

Here are 5 critical factors for increasing the likelihood of surviving bankruptcy reorganization:

1. Being Dedicated to Consistent Communications
2. Maintaining Timely and Accurate Financial Reports
3. Identifying Strategic "Good News"
4. Defining a Feasible Turnaround Plan
5. Bridging the Bankruptcy Lawyer's Knowledge Gap

NAPL members can gain these insights and more on a courtesy basis by scheduling a confidential telephone or in person meeting (coordinate through Kathleen Appleton @ 201-523-6309).

Classic Graphics acquisition of Belk Printing Technologies: 3 Lessons Learned

Without breaking any client confidences, I can share 3 "Lessons Learned" from the January 2011 announcement of the M&A transaction involving Classic Graphics and Belk Printing Technologies: http://www.napl.org/Media/Classic-Graphics-and-Belk-Printing-Join-Forces 

1. Start M&A talks with a fresh perspective even if prior encounters failed. Owners who rule out potential M&A opportunities because "we already talked with them" can miss the boat by getting caught up in the past. New opportunities come with each new day. Classic and Belk flirted over the years but that did not prevent a "fresh start" to exploring a potential transaction.
2. Trust the recommendations from independent professional advisors. The objectivity and independence of an industry-specific resource (in this case, NAPL) saves time, lowers frustration, decreases risk, and depersonalizes the emotional aspects. In this case, both parties had lots of their own "brain power" but one of the keys to success was that each side trusted the advice from NAPL.
3. Having your financial "house in order" is a prerequisite to successful M&A involving privately-owned print and graphics communications companies. In this case, both companies had excellent data and could efficiently provide inputs and analysis that helped NAPL to quanitfy synergies, establish a realistic valuation, and conceptualize possible transaction structures.

 

 

 

Trust But Verify: Seller's Due Diligence

From NAPL's vantage point, more than 90% of printing industry mergers and acquisitions involve a continuing relationship between the buyer and seller.

The seller's ultimate realization of value is probably affected by future events controlled by the buyer. This could involve employment/consulting services, or landlord-tenant aspects, and there may be earn-out or royalty payments to collect.

My blog post dated December 15, 2010, discusses the importance of seller's due diligence into the buyer's financials and strategy. But even before actual due dilgence which takes place between the letter of intent or term sheet and the Closing, should a potential seller seek verification of a buyer's financial viability?

I believe a conversation on the topic of financials is appropriate even at a very early stage, although verification should await the due diligence process.

For example, the potential seller can fairly ask, "So, what are you seeing as to year over year comparisons? How did you do last year compared to this year?".

Another prompting question can go like this: "So, are you treading water like 95% of the industry?"

As to debt, here's one of my favorite ice-breakers: "We all know that this is a capital intensive industry. Are you guys heavily leveraged, just about right, or not carrying much debt?"

Remember, trust but verify. Trust via conversation early on; verify during due diligence before Closing.