As the print and graphic communications industry continues to redefine itself, not all owners seeking to reduce costs via consolidation savings are interested in transitioning from ownership. An alternative to "merger" or "sale" is a landlord-tenant alliance that looks and feels a lot like a "tuck in" acquisition.
The basic concept is that one company relocates to a landlord/strategic partner in order to save on overhead costs. The arrangement can go anywhere on the spectrum from shared infrastructure to landlord-tenant lease and beyond.
The good part: ownership is not affected so each side remains independent, which is comforting if it doesn't work out, at least in theory.
The bad part: no skin in the game for the landlord means they hold all the cards on negotiating the details and resolving disputes as they come up.
The other "not so good" points:
- confusion in the marketplace among customers;
- bank and leasing company consents;
- uncertainty among employees;
- supplier credit concerns;
- liability risks;
- what if the landlord/partner sells its business?
We've seen recent cases in which the jury is still out: one in Northern California involving two highly reputable companies; another one in New Jersey in which the "landlord" also provides production labor to the "tenant" who is paying fair market rent; and a NYC area deal announced as an Acquisition which really involves relocating equipment still owned by the "seller".
I remember a "dating before merger" case in Connecticut over ten years ago in which the two owners bonded like brothers and headed out to DRUPA to further cement the relationship. Shortly thereafter the chemistry turned, and eventually the "tenant" went under and the "landlord" circled the drain not far behind.
Anyone thinking of going this route should seriously invest in professional advice (meaning, NAPL's Business Advisory Team) to map out the plan and be sure the bases are covered.
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