Insiders offer their perspectives on this industry trend
By Stacey Wenzel
Mergers and acquisitions played a major role in shaping the industry last year. Not surprisingly, the first few months of 1998 have shown no signs of the acquisition explosion slowing down.
"It's the wave of the future," said George Allman, vice president of diversified operations for DFS Business Forms, Townsend, Mass. Allman should know from his recent acquisition experience.
On Dec. 23, DFS announced the purchase of Bridgeton, N.J.-based manufacturer Newshire.
"This is part of the demand and drive for companies to become more efficient," he said. In addition, Allman noted another motivation behind many acquisitions is that companies look "to leverage systems to improve capabilities over an even bigger sales base."
Merging Strengths
Some secondary reasons companies may consider merging with another company is to gain additional product lines as well as add a wider customer base that is complementary to their own foundation of clients.
"It's sometimes cheaper and quicker to acquire a company rather than develop additional businesses, customers and skills," said Allman. He noted that both DFS and Newshire will end up having more resources available, such as equipment and people skills, to do their jobs more proficiently.
With this in mind, it is easy to realize that both companies are able to benefit from an acquisition, not just the acquiring company.
"It allows us to become more competitive," said Richard Barbuto, vice president of Newshire. He added that the acquisition makes it easier to grow sales in a maturing market place.
Also, it is more cost-effective to move more jobs across the press, lower paper costs by increasing volume, lower set-up costs and reduce the number of plate changes and ink colors, said Barbuto.
"Newshire was growing sales faster than it was able to grow production," he explained. The temporary answer was to increase staff instead of investing in new equipment. That solution resulted in the equipment being used 90 percent of its available operating time, with an increase to three shifts for Newshire employees.
According to Barbuto, because Newshire was previously owned by an investment company--who didn't always understand what was necessary to grow the manufacturer--it was sometimes difficult to get help with such matters as purchasing new equipment to keep the competitive edge.
Barbuto said DFS knows that a company has to invest money in equipment in order to grow as a business.
Because the two companies are so compatible in philosophies, it was an easy transition to merge into one stronger presence within the industry.
The markets that DFS and Newshire service may overlap, but each has some differences worth noting. For example, DFS is strong in the quick printer market, while Newshire is well-known as a supplier to the business forms broker. This diversity will provide a wider variety of products to both customer bases, but may bring up questions as to how the merger will affect customers.