Banks Licking their Wounds and Being More Patient

One interesting trend I'm noticing is that at the front end of the downturn, banks were very quick to shut down printers who were in financial distress and had violated financial covenants in their loan agreements. Today, some banks are actually being a little more patient because they realize that if they foreclose on their liens there may be even less realizable value to them. For example, the used equipment market is a disaster and selling used equipment isn't going to get a bank any meaningful recovery.

Gross margin deterioration

Seeing a lot of companies with significant gross margin deterioration. Explains why the competition among printers is so heated - folks are giving away print just to keep the cylinders running. This is bad news short term for printers who are still trying to make money, but good news long term since selling under cost is not a viable long term strategy and those companies practicing it will drive themselves out of business in fairly short order.

Couple of Interesting Articles on Strategy

Click on this link (www.cgx.com) and go to the two articles I wrote last year on CGX's M&A strategy (scroll to bottom of page). All still true although we are being even more creative in this environment.

Observations from the Front Line

This is officially my first post on this blog. The purpose of this blog will be to share information on the state of the printing industry and to stay in touch with printing company owners and others who are involved in merger and acquisition activity in our industry. Right now, our industry is going through a tremendous shakeout. In 2001 there were 50,000 printing companies in the United States. By 2003 after the 9/11 shakeout, there were 35,000. What I'm hearing today is that when the dust settles after this recession there may be 20,000 or fewer printing companies left standing. It is brutal out there. We are feeling it just like everyone else (just look at our recent 10-Q...not pretty). We are still actively acquiring printing companies and being very creative with deal structures due to the challenges being felt by virutally every company fortunate enough to still be competing in today's environment.