Monday, August 8, 2016

Paper Distributors Consolidate

It’s no surprise that Lindenmeyr has recently announced that it had acquired Graphic Paper, a paper distribution company based on Long Island, New York. According to The Target Report, there was significant M&A activity in the paper industry during 2015, of which seven transactions involved the acquisition of formerly family-owned distributors of printing papers. Especially notable was the acquisition of Gould Paper by global paper distributor Japan Pulp and Paper Company. Lindenmeyr itself was active earlier this year, having acquired the C.J. Duffey Paper Company, a Midwest paper distributor.

For financially distressed printing companies, there was a time when paper companies such as Lindenmeyr Munroe and Graphic Paper held all the cards: the power to determine whether and how those cash-strapped printing companies could obtain critical shipments of paper. These distributors trafficked in a closed loop of fact, rumor, and on-site reconnaissance that gave them a leg up on other trade suppliers searching for vital clues about a printing company’s chances for survival. Their decisions, some of which were effectively made in concert with their paper supplier competitors through credit organizations such as The Paper & Allied Trades, had ramifications for printing company owners far and wide.

As an advisor to owners of printing companies, I have heard both sides of the story; paper distributors have legions of fans and detractors. The distributors’ credit decisions helped some printers to survive tough times and return to profitability as the commercial printing market has stabilized. Others told me that they blame the paper guys for “keeping the boat afloat” of money-losing print shops whose doors should have closed BUT FOR the generous supply of paper on loose credit terms. The result, they say, is the chronic hyper-competitive pricing endemic in the commercial printing industry.

From my perspective having negotiated hundreds of acquisitions, orderly liquidations and debt restructuring cases over the past 25 years, I have nothing but respect for both Lindenmeyr and Graphic Paper. They have been professional and effective in making difficult decisions under the backdrop of a declining industry. It is with somewhat of a heavy heart that we say goodbye to one of those paper distributors, Graphic Paper, that has helped many printers in the New York metro region.

 John Hyde