2013: The Consolidation Wave Will Pick Up Steam

Several acquisitions took place at year end in the label space. Recent acquisitions announcements include WS Packaging acquiring Label World,Pro-Mach acquiring Logmatix, and Svoboda Capital acquiring MEI Labels. All three transactions were completed before year end, more proof to our politicians that, yes, Virginia, taxes do matter. Of note, both are strategic acquisitions.

I expect the consolidation wave to hit hard in 2013 and 2014. Several factors will drive this trend. First, we have some certainty regarding tax rates. Yes, we’ll still get some squawking from the blowhards in Washington D.C. but we have a better understanding now than we did a few days ago of what the tax future holds. Any reasonable person would agree that most owners of label converters will see their taxes go only one way in the foreseeable future – up. Second, most acquirers want to see 3 years of reasonable history. 2010 plus 2011 plus 2012 means the trend is your friend if you’re selling – the recession year of 2009 is not weighted as heavily as before. Third, demographics will continue to drive people to find exit strategies. Owners with no succession plans will put weight behind numbers 1 and 2. Fourth, as I’ve written in the past, the game is changing. Capital investment demands are increasing. Not everyone in our industry can or wants to ante up to play. Fifth, competition drives the requirement to get bigger. We have a few goliaths in our industry now. Those of us who are much smaller face the choice of getting bigger or finding a niche. Several will decide getting bigger is the way to go. Finally, while overcapacity is less of an issue than it was a few years ago, we still have too many converters chasing too little business. If you can’t beat ‘em, join ‘em!

I.D. Images continues to grow and look for sources of growth. If you want to talk, give me a call.

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