Hyding Out

The Case for Foreign Buyers of Print and Graphics Communications Companies

Consolidation in the print and graphics communications industry has not yet experienced significant foreign investment by acquirers into the domestic USA marketplace. One could argue that the fundamental changes affecting our industry do not support a safe investment by foreigners.  I take a contrarian view that says meaningful opportuniites exist for entrepreneurial owners who will take advantage of market redistribution and emerge as leaders on the other side of transformation. 

Although I do not profess to have a crystal ball, here are 3 reasons why I believe our industry will become attractive to foreign capital, giving hope to those seeking to transition from ownership over the next 3-5 years. 

The Students Will Stay:   Have you noticed how many students come to colleges and graduate programs from overseas? At Emory, for example, 40% of MBA students are born in countries around the world, and at NYU, the percentage is even higher. Some of these students will want to stay in the USA and one way to secure their future is to seek investment/entrepreneurial opportuniites in small to mid-sized companies. These "lifestyle" buyers would bring new energy, global thinking, and money from home.  It's been documented by NAPL research that our industry is facing long term succession planning challenges due to age and demographics. With 25,000 or so privately-owned companies, the print and graphics communications industry is an ideal venue for the convergence of lifestyle/foreign buyers and succession planning/domestic sellers. 

M&A Investment Carries a Green Card:     Immigration reform is forever going to be debated in political circles, but below the media radar is a trend toward supporting legal immigration through direct investment. The little known EB-5 immigration program provides a green card to foreign individuals and families who invest $500,000 or more into a domestic USA business. The connection between the "The Students Will Stay" and "M&A Investment Carries a Green Card" makes sense when you realize that funding required to qualify for a green card is commensurate with the $500,000 to $1,000,000 capital needed to acquire a viable quick and small commercial printer.  This avenue cuts in favor of bringing money and family to the USA. 

Direct Investment by Foreigners is an Ideal Safe Harbor for Capital:  Capital preservation is an age-old reason for foreigners to secure their personal wealth by direct investment in USA assets such as real estate, stocks, and businesses. Political uncertainty and currency stability are primary reasons for capital flight, but growing concern about taxes around the world is going to add another variable in favor of direct foreign investment. Type "Financial Transaction Tax" into Wikipedia to learn more about why I think we will see more money looking to go elsewhere.  Just my opinion, but I believe money from overseas will find its way into domestic investment in the USA despite this country's budget deficit, economic and political challenges. 

 

 

 

 

Is Your Financial Information "Transaction Ready"?

If you plan to DO NOTHING with your printing and graphics communications business during the next 3 years, stop reading. But this blog post is for you if you are one of the many owners who may engage in one or  more of the following types of corporate transactions by December 31, 2014:

1. bank financing for line of credit
2. equipment financing
3. real estate expansion
4. merger or acquisition
5. sale of business to strategic buyer or entrepreneur
6. private equity or ESOP
   
7. succession planning gifting of shares

The date is relevant because many corporate transactions involve 3 years of financial statements and right now is when a lot of companies are putting together their 2012 information.

The question is: when you are ready to seriously consider a critical corporate transaction, will your financial statements by ready to effectively communicate your story? More importantly, what steps can you take NOW to be sure your house will be in order when the financials go under the microscope?

At NAPL, we suggest that owners and senior managers step back from the usual process of preparing year-end financial statements and assess the extent to which their financial information presents the company in the best light possible.

Here are 3 questions to ask your team (and yourself):

• What conclusions would be reached when you present year over year sales and EBITDA comparisons including documenting adjustments related to owners' compensation, affiliate transactions, and one-time items?
• Are the financial statements prepared by a reputable CPA firm using "review" or "audit"-quality standards complete with footnotes?
• What is the company's break-even point and what observations can be made based on tracking projected vs. acutal results each month?

Remember, a skeptical CFO-level analyst must be able to quickly construct an accurate cash flow model using your information. It's in your best interest to be sure your financial information is "Transaction Ready" before you open the door to a corporate transaction. 

Feel free to contact me or my NAPL colleague Tim Fischer, our resident subject matter expert on financial management issues, to request a confidential evaluation of your transaction readiness.