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Market Trends

Mergers and Acquisitions

Whether it’s joining forces with a tech-savvy start up, or combining portfolios with an international distributor, mergers and acquisitions enable firms to expand business. Carys Evans analyses the possibilities

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Mergers and acquisitions can be strategic ways to strengthen business

Sharing skills to strengthen business

When one company takes over another and establishes itself as the new owner, this is an acquisition. From a legal point of view, the company which has been acquired ceases to exist, the buyer absorbs the business and the buyer’s stock continues to be traded while the acquired company’s stock does not.

A merger usually involves combining two companies into a single larger company. The combination of the two companies involves a transfer of ownership, either through a stock swap or a cash payment between the two companies. In practice, both companies surrender their stock and issue new stock as a new company.

By merging, companies benefit from factors such as staff reductions – although not necessarily good news for the staff themselves – in terms of costs, a reduction in staff means a reduction in payroll which is a financial benefit for owners. Mergers can also enable companies to acquire new technology, and in turn stay competitive and at the forefront of evolving and advancing markets.

According to the Office for National Statistics, between October to December 2018, the total value of inward mergers and acquisitions was £33.3bn – the highest value since quarter four of 2016. The value of mergers and acquisitions for the entire year has rocketed since 2017, growing from £35.2bn to £71.1bn. Domestic mergers and acquisitions (UK companies acquiring other UK companies) was valued at £5bn for the fourth quarter of 2018 and was the highest recorded value for the entire year since 2008 at £26.5bn.

O Factoid: According to the Office for National Statistics, the total value of inward mergers and acquisitions for 2018 was £71.1bn. O

Recognising an acquisition opportunity is just the first step in a long and sometimes complicated process. So where do you start, and how do you go about completing the successful acquisition of a company?

Before a company can acquire another, it must ensure that it is first entirely financially stable with business at a healthy point. Before a company decides which firm it would benefit most from acquiring, it makes sense to first sit down and work out exactly what you can afford to buy.

There are a number of steps to consider in the process of acquiring a company

Another question to ask before moving forward with an acquisition, is do you have the strength and capacity in your team to complete the process? Integrating teams, processes and customers can all prove to be a tricky job if you don’t yet have the means to efficiently complete this.

When deciding which company is the right one for you, it is important to make sure that you fully understand the business and how it could complement yours or drive your business forward. Think about what your strengths are, and your weaknesses. Acquiring a company with the same strengths as yours has the potential to propel your services even further, allowing you to offer even more to existing customers. Acquiring a company which would bring strength to your areas of weakness provides the opportunity to widen your offerings to broader markets and access even more clients.

Merging companies is a way to combine strengths and expertise to move into other markets

It is also important to remember that no two companies are the same. Therefore, every single acquisition or merger will have its own pros and cons. It is just about sitting down and working out what it is you want to get out of the partnership and then decide whether it is a realistic, achievable next step.

Combining strengths

At the start of the year, Wyndeham was merged with and rebranded as Walstead Group to unify business under a single brand. The six Wyndeham companies that underwent the rebrand were Walstead Bicester, Walstead Binders, Walstead Grange, Walstead Peterborough, Walstead Roche, and Walstead Southernprint.

Walstead Group is the largest commercial web offset printing business in Europe. The firm, which is headquartered in London employs 4,400 staff at 19 production facilities in the UK, Spain, Austria, Czech Republic, Slovenia, and Poland.

The printing specialist operates 67 web offset and four gravure printing presses that produced over 500 billion A4 pages using 900,000 tonnes of paper in 2017.

Despite already operating successfully independently, Paul Utting, chief executive officer of Walstead Group explains why the group decided to merge: “Wyndeham has been a well-established and recognised name in the UK print industry for many years. However, with the rapid growth and expansion of Walstead, it is time to unify our businesses under a single brand that demonstrates our combined strength as the number one printer of choice for publishers, retailers and brand owners across Europe.

“Uniting Wyndeham Group’s companies under a single Walstead umbrella brand will provide our customers, suppliers and other stakeholders with a distinct and integrated business name and clearly communicate the scale of Walstead’s offering.”

Opening wider markets

Durst recently merged with Koenig & Bauer on a 50-50 venture which will cement the two firms’ knowledge and strengths. The venture is planned to be based in Germany and will assume responsibility for the worldwide distribution of water-based single-pass digital printing presses for folding carton and corrugated board.

Claus Bolza-Schünemann, chief executive officer of Koenig & Bauer says: “We are looking forward to joint innovations and further developments in future-oriented digital printing technology for folding carton and corrugated board, and not least to the added value this will offer to our customers.

“With its wealth of existing know-how, extensive inkjet experience and high-quality solutions, Durst Phototechnik is the ideal partner with whom to pursue the defined objectives. As digital printing pioneers, the company has been developing inkjet applications for 25 years and is very successful in digital printing on ceramics, textiles and corrugated board.”

Koenig & Bauer’s VariJET 106 digital sheetfed printer for folding carton

Christoph Gamper, chief executive officer of Durst Phototechnik, adds: “Durst is a technology leader in the field of inkjet printing and has already contributed to the digital transformation of production processes in various branches.

“In the printing industry and in surface decoration, in particular, Durst printing systems are deemed to set the standards with regard to print quality and productivity. The partnership with Koenig & Bauer opens up new prospects, as Koenig & Bauer commands not only engineering expertise, but also very good access to the market.

“By combining our know-how, we are in an ideal position to develop and offer fully automatic production lines and will thus also be able to contribute to digital transformation in the folding carton and corrugated industry,” concludes Gamper.

A spokesperson for Durst says: “Through the joint venture, both companies can focus on the future of digital printing solutions in folding carton and corrugated printing. The cooperation will generate synergies through Durst’s expertise in digital printing and Koenig & Bauer’s expertise in mechanical and plant engineering.

“Both parent companies stand for innovation. For this reason, the joint venture has the greatest interest in always offering the leading inkjet technology.”

When it comes to finding the right company to combine skills and expertise with, in order to successfully grow business and expand into other markets, Koenig & Bauer advises that the aim should be to grow together with a common goal. The product fit, internally and to the market has to be correct.

Durst adds that innovation is the starting point for a successful merger. The firm explains that when both companies stand for innovation, the joint venture will have the greatest interest in always offering leading technology – much like its venture with Koenig & Bauer.

Plan for relocation

When acquiring a new business there are lots of logistical factors to plan for and consider. For the Lenvale Group, the acquisition of a company to its group meant physically relocating the entire set of machinery to a shared space.

The firm recently completed the acquisition of Kes Reclamation in a move to expand and develop the group. Martin Ferrari, group managing director of the group describes how Kes Reclamation was a complimentary business to the group’s existing operations focusing on the use and manufacture of paper-based products.

Martin Ferrari, group managing director of The Lenvale Group with a sleeping bag manufactured for a charity sleep out

“As the demand for paper continues and due to the fact that we are agents for various mills and a paper supplier, Kes Reclamations’ continuity of supply under the Lenvale banner allowed the firm to offer improved security of supply to its existing customers,” says Ferrari.

As a result of the acquisition, the business has been relocated from Iver Heath, around the M25, to Strood in Kent. This involved a complete dismantling of equipment over the Christmas period allowing for the refurbishment of components and re-alignment of the running gears. “The machine relocation went extremely smoothly, and we are seeing the benefit of improved operational efficiency,” adds Ferrari.

In addition to moving operations to a joint site, the process of acquisition involved negotiations on price, security of funding and ensuring legal compliance before it was successfully completed.

The acquisition will undoubtedly add an even greater depth to our customer offering and increase the group’s profile in the dynamic UK marketplace

Having acquired Blaybourne Converters prior to Kes Reclamations, all businesses are now operating on the same site. Ensuring that the skillset and knowledge is preserved during an acquisition is one tip Ferrari gives for the successful acquisition of a company.

To achieve a smooth acquisition, Ferrari says: “Ensure you understand the business and retain the skill base in the organisation being purchased. This expertise is vital for the new start-up phase.”

Having spoken to those who have completed acquisitions and mergers successfully, the common theme appears to be to make sure that your goals are in line with each other. The age-old saying “fail to prepare, prepare to fail” is a key reminder in this area of business that without full preparation, the merger of acquisition is less likely to be beneficial or successful. So, make sure you have done all the background work and research needed to be fully prepared and equipped to make the successful move to grow and strengthen your business.

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