Takeover mania comes to a company near you!
By James Cryer of JDA Recruitment
Industry consolidation is inevitable. Or is it? Is it important? Is it good for the overall industry? These, and other questions are addressed by industry observer, James Cryer, as he teases out some of the issues surrounding the current spate of takeovers and mergers going on within the offset AND signage sectors.
In case you hadn't noticed Blue Star is taking over two of Australia's largest web-offset printers - and two of Australia's largest printers PMP and IPMG (HannanPrint) are also snuggling up to form a virtual monopoly.
And in case you think this doesn't affect the signage sector, think again: Blue Star has also just gobbled-up a large Sydney-based displays company!
Is anybody experiencing that feeling of deja vu ... we've seen it all before?
Just like hula-hoops and yo-yos, industries go through cycles ("fashions" would be a little unkind). Wasn't it just a few, short years ago we were lamenting the arrival of a bunch of venture-capitalists, their saddlebags bulging with cash, embarking on a frenzied take-over spree which saw many of our iconic brands (then all big-iron offset, of course!) disappear into oblivion. Recall, then, how all of us to a man ... sorry, to a person, lamented this loss as bad for our industry, bad for employees, and (last but not least) bad for customers!
And if we went back a bit further, into the mists of time swirling around in the Year of Our Lord 2001, we may vaguely recall that it was none other than that most fearsome scourge of monopolists, the ACCC, which forbade the mooted merger of PMP and IPMG on the grounds that it would, ahem ... "significantly reduce competition"!
Now - fast-forward to 2016 - the feeding frenzy has resumed, but everything's alright! The only difference, that I can see, is that were not being eaten alive by an external predator - but from within! A bit like a creature eating itself alive. I think there's a word for that, but we won't go there.
The point, however, is this: no matter what spin we put on it, all consolidation, merger activity, call it what you will, is bad for competition, and usually bad for the customer and some employees. Think banks, airlines, breweries, newspapers (or what's left of them), petrol companies, retailers .. the list is endless; and in all cases, the monopolistic tendencies that resulted, have all lead to worse corporate behaviour, not better.
Don't get me wrong: if I was poised on the brink of being able to gobble up my competitors, I'd do it, too! That's the nature of competition and there's no place for hand-wringing or false morality here. Lions eat people and company bosses (if possible) devour their competitors.
But I don't think we should wrap it up in sugar-coated press-releases that it is "good" for our industry.
No matter which way you look at it, reducing the number of competitors pleases only one group of people: shareholders! And yet, reading the various press-releases full of unalloyed joy, and the uncritical adulation by our trade press, one could be forgiven for thinking these large (soon to be larger) companies were throwing $100-dollar bills to us all from the rooftops.
Some of the comments from current CEOs include “ I have no doubt that our dedicated staff, our suppliers and our customers will benefit greatly ...". Unpacking that statement suggests the staff will benefit by getting higher wages (or perhaps he means by "not getting fired"?); suppliers will benefit from being paid more for their services, and customers will benefit from receiving lower prices! Hands up anyone who sees what's wrong with this picture.
Another CEO perhaps hits the nail on the head when he refers to "value for our shareholders" but he also mentions "improved customer outcomes" and "new opportunities for employees". What, to join the dole queue? But there's little risk of that, so we're told, by none other than Lorraine Cassin (secretary of the AMWU) who, in a masterstroke of naivety says she "hopes" the merger will not cost jobs! (Hello Lorraine, if you believe that, you believe in the tooth fairy!)
How things have changed: such is the zeitgeist now, that even unions approve of these mega mergers!
But virtually all the chairmen of those entities involved, refer to the challenges of "over-capacity" (surely they're not singing from the same song-sheet?) and yet somewhere I read that "the catalogue market [is] one of the few sectors in printing that is recording continuing growth"! And this is echoed by Kellie Northwood who continues to sing the praises of print over electronic alternatives and sees a great future for printed junk-mail.
And who says big companies are necessarily more efficient than smaller ones?
So why the feeding frenzy? It may have something to do with low interest rates making such acquisitions so palatable. It may have something to do with these giants being asset-rich behemoths that they have to find ways of throwing cash overboard at anything that moves. Or it may have something to do with them having become a public entity, now driven by the voracious (and insatiable) appetite of its shareholders. But whatever the reason, we all know it's usually much easier to grow by acquisition than organic growth - and you get rid of a few competitors at the same time.
There is no room for morality, however, in this brave new world. We've chosen the path of de-regulation: the law of the jungle, the survival of the fattest. We've unleashed the voracious beast and who knows where it will take us? But is this what we want: a regulatory regime that, notwithstanding the obvious result of reduced competition, merely looks the other way. This level of market domination probably would not be allowed in the US. Have we thought about what happens in an industry dominated by a few large players? What happens if the agendas of these large companies deviates, or is at odds, with the aims of the major industry body?
I wish there was a way of actually measuring the truth of the statements, made by the various CEOs and chairmen (yes, they're all blokes), when they assure us that everyone will benefit - even customers.
In one sense, I don't care if these mega-companies do well - good on them! But, as in all things, there may be hidden consequences. We should think long and hard, as an industry. Is this what we want? For an industry to survive it needs diversity. But on this issue there has been very little debate, and sadly, virtually no critical analysis from our own trade press. Are they too beholden to these large players via advertising and sponsorships to want to "rock the boat"?
This spate of merger activity will change the print landscape dramatically and forever. We need more critical and informed debate; not just PR statements telling us its ''good for everyone'.
JDA Print Recruitment