Tuesday, July 20, 2010
Over the last two years, the printing industry has been hit hard by the recession. Most companies have experienced revenue declines of anywhere from 15 to 50 percent, and as a result their earnings have been wiped out. In many cases, printing companies have no positive cash flow and are in various degrees of covenant default (if not payment default) on their credit lines. Many have had to restructure their equipment leases as well. Banks were initially slow to pursue their remedies because they were busy licking their own wounds, dealing with bigger problems and not eager to take any additional write offs. That is changing and banks are beginning to focus more on their printing industry credits so I expect even more company failures to occur over the next 18 months as creditors tighten the screws on their poor performers. This is bad news for printers that are in distress but good news for the survivors as excess capacity (and below cost pricing) will be wrung out of the system. What this means for the M&A landscape is that there will be even more opportunities for white knights to rescue distressed companies, something we have been doing quite a bit of.