mergers & acquisitions 
Like a good marriage, the secret of merging your business successfully comes down to choosing the right partner and being prepared. David Catt reports When you cast your eye onto the current printing landscape in Australia, one will see an industry struggling. The old adage "there’s nothing wrong with a little friendly competition" no longer applies in an industry that is suffering from over-population and under-utilisation. A tough and uncertain global economy is forcing clients to think smarter on how they spend their dollars with printers, creating retracted and more targeted printing runs and resulting in a bidding war between printers that is everything but sustainable. It is no wonder that many have begun to cast their minds towards the once dirty word "merger".

Merging is not a new thing to this industry but is increasingly becoming the only option for printers watching diminishing sales threatening the very viability of the business they have poured many long hours into getting off the ground. According to Contact Printing director David Lee, whose company recently formed a merger with fellow Sydney-based printer Clarendon Print, many printers are leaving or have left the option of forming a joint venture too late. This is resulting in a plethora of companies wandering around the market, desperate to form a joint venture regardless of the ramifications for all parties concerned. Lee warns anyone with the view of forming a partnership to give pause towards choosing the right partner before signing on the dotted line.

"What normally happens is a lot of businesses have been walking around town ’tarting’ themselves. They have been continually hanging on and when you actually say ’look, let’s sit down and talk’, you find there is a big hole and they are looking at you to pull them out of the hole. You can’t do that," explains Lee.

"It is damaging the industry too. What you have is the ’quote-and-hope printer’, where he quotes low and hopes he gets the job. If he doesn’t, he quotes them a lower price next time. They are damaging the market because they’re not providing the consumer with what the consumer really wants."
Former Clarendon print general manager Stephen Alfonzo, who is now on board with the merged entity agrees, and believes that under-utilisation has reached chronic levels.

"Printers really don’t have a choice. There is basically too many printing presses around. I went to a seminar last year and the main point was that you could bulldoze half of the presses off the end of a pier and it wouldn’t make on iota of difference to production. There are just far too many presses around," says Alfonzo.

Practical steps
While there has been a lot of tough talking going on and some mergers have been taking place, for a variety of reasons many are still reluctant to acquire or be acquired. While no-one can force the hand of a reluctant printer, there are a number of steps that can be taken to make one’s company suitable for a deal should the need or opportunity arise.

The most important consideration to make is that rarely will your business be ready to form a joint venture or be purchased without a lot of preparation first. Instigating a merger or an acquisition when you have existing debt or glaring inefficiencies may be difficult, nor will it make you an attractive option for a company in the market to expand its own business.

According to chartered accountant Peter Longhurst, developing a two-year plan is ideal, even if selling or merging isn’t something that is a pressing issue at the current moment.

"There are three main steps to setting up a plan. You have to determine where you are now and determine where you want to go. Ask yourself whether there is a particular business that you want to target, or do you just want to retire and run the business down? Then you have to work out what strategies you need to put in place to achieve those particular aims," explains Longhurst.

"It’s not a very difficult process, and it is a very rewarding one at the end of the day."

But how does one go about performing such a task that can appear from the outset to be a daunting one, and at that, one often fraught with emotion? After all, such businesses have often been passed down through many family generations and have required a lifetime of dedication and hard work to establish.

Refine
The first step in boosting your company’s appeal is to refine your systems. Check your throughput and determine whether it is flowing freely. If necessary, put measures in place to simplify the process. You should then check and make sure you have the right management structure in place. Ideally, you want your management team to have the same vision and goals for the company as you do, so as to prevent a sabotage from within when and if negotiations are entered into. Your financial situation, possibly the most important consideration of all, needs to be scrutinised. The last thing you want to have happen is to have your options constrained because you are unable to make a high enough bid or are unable to woo a potential business relationship because of an unsound business foundation. A lack of solid financial assets may also scuttle both companies before the joint venture is able to even get off the ground. In the case of merging or being acquired as the only option besides closing down business altogether, stemming the flow of money out of the business may be your only option.

Longhurst recommends that you keep in regular contact with your adviser, whether it be an accountant, lawyer or business consultant, so that you may keep any plans you have on track and maintain your business on a steady course forward. In fact, the closer you come to making a deal that involves the future direction of your business, the closer the contact you should have with your adviser.

"Accountants are something that many people think cost your business money. In fact in many ways they can really help you enhance your business," says Longhurst.

"If you don’t have advisers that are regularly contacting you to help you with your business, you really should be looking around for an adviser who will."

An adviser may also be able to help you clarify your business focus, identifying the winners and losers in your product group, therefore giving your company a more purposeful and unburdened direction. Writing off bad debt and obsolete stock is also an invaluable step to take in this regard. Clarifying your focus will be helpful for your business regardless if it is entering into a merger or not.

Another helpful exercise, regardless if a new business venture is on the cards or not, is to ensure your advertising material is up-to-date and truly reflects the nature of your business. Advertising constantly needs to be refined as your business naturally grows and changes. This will show potential suitors that your business is vibrant and focussed, and will instil confidence in a company that you may be approaching that yours is a company they wish to do business with.

The final aspect of business refinement is an ongoing process of constant business maintenance and repairing problems as they are identified. While this does refer to the usual issues with machinery breakdowns and employee relationships, the financial issues are just as important and are an important reason to have a healthy business relationship with your adviser.

Document
In business, keeping clear and up-to-date records of all dealings and transactions is fundamental, particularly when it comes to assets and business transactions. With assets, regardless of whether you have much or little, transparency is key. Ensure that such business records are available for immediate presentation to all relevant parties.

"For any purchaser, there should be records available to be looked at. You can really enhance the value of your business by following this simple step," says Longhurst.

As a rule of thumb, keeping financial records going back three to five years is a must. Not only will it help you should questions about your company’s financial position be raised by various authorities, it will also prove to potential buyers or sellers that your company is indeed worth what you say it is. Keeping tax records and ensuring that your company does not fall foul of the taxman, as well as having proper documentation of all employee’s superannuation and leave entitlements is also key to this process.

The value that such documentation extends beyond having watertight financial records. Keeping a detailed and regularly updated list of your major customers and suppliers, including a report on the history of your relationship with them, has an inherent value all of its own. Often when printing companies merge or one acquires another, the forming of a cumulative customer database will not only ensure the venture remains afloat, it brings an all-new meaning to the old adage "strength in numbers".

Ensuring that all trade and licensing agreements are properly documented and secure is essential to the long-term viability of any business. These documents are highly valuable and should not only be kept in a secure location, but also be well ordered and kept up-to-date. Once again, keeping such documents ready for whoever may need to see them will enhance the worth of your company in such major business transactions.

An obvious point is to make sure that your company’s statutory records are updated regularly, however according to Longhurst, all too often these records are neglected and can easily lead to fights over who actually owns the business. In a court of law, failure to provide statutory records can be lethal to your business, or at best, extremely embarrassing. Neglected records won’t impress prospective business partners either.
Detailed documentation of all lease agreements on buildings and equipment is also important, as are updated and realistic depreciation and maintenance schedules.

Protect
Reviewing your personal exposure in any sort of business transaction is important, not just for the sake of your business, but also for your personal well-being. A simple but rarely heeded piece of advice is to move your assets into the name of a trusted loved one, so that should something untoward happen, the personal assets of you and your family won’t be caught up and potentially taken from you. Be smart in this respect, for example, if you transfer your house over to your spouse’s name, ensure the payment of the rates go under that name, otherwise the ensuing paper trail may enable creditors to claim your property. Once again, liasing with your business adviser in this matter is strongly recommended.

As a vast number of Australian printing businesses are run as family-owned operations, it is common for a family member to step into the driver’s seat once the boss resigns. While protecting yourself in such business arrangements is important, you should also give thought to protecting those who have loyally served your company for all these years, doing everything you can do make sure that your plan for succession is honoured.
"You need to document this for yourself, the person in question and the company that you are moving your business into a relationship with so as to convince them that they need to keep this worker on, because you have some loyalty to these people," says Longhurst.

Keeping all your workers informed of any business transactions that will affect their employment conditions is more of a mark of respect than anything else, but will also improve beneficial to your integrity. In many cases, redundancies will be inevitable and it is only fair to give your workers enough time to weigh up their options. Workers may also wish to decide whether they want to be part of a merged entity or not.

While all this may seem to be a very long and daunting checklist, any company that has inherent worth and has lasted for a respectable period of time will already have many of these systems in place. However, a little extra diligence never hurt anyone and may mean the difference between seizing the opportunity when and if it comes along, or being the one that is overlooked and left to rue the day.