Is Your Business Treading Water? Grab Hold of These Reality Checks.

Even successful companies in the printing, packaging, mailing, and graphic communications sectors can experience a sudden shift in fortunes. A once-thriving operation can quickly begin to struggle—sometimes without clear warning signs.

Downturns can be triggered in many ways. Some are internal, such as the departure of a top salesperson, the loss of a key account, or a major customer scaling back its print marketing budget. Others stem from external forces, like supply shortages, price volatility in paper, or broader market disruptions such as trade wars or public health crises.

Regardless of the cause, the early stages of financial distress often bring confusion, wishful thinking, and costly missteps. Graphic Arts Advisors’ Special Situations Practice has identified five common misunderstandings that arise during periods of financial instability—and offers key insights on how to address each one.

Misunderstanding 1:

“There are no personal guarantees on loans, so there’s nothing to worry about.”

Reality Check:

Even without a signed personal guaranty, owners may still face personal liability. Creditors can argue that certain actions—such as incurring new debt when insolvency is apparent—constitute misconduct, exposing officers to claims outside the protection of the corporate veil. These situations often lead to what GAA calls a “backdoor personal guaranty.”

Guidance:

A detailed analysis of contracts, creditor claims, and asset ownership is essential to developing a risk-mitigated plan for either an M&A exit or an orderly wind-down. Non-contractual liability issues arise in approximately one-third of the special situations reviewed by GAA. Many can be avoided with early, experienced intervention.

Misunderstanding 2:

“Our accountant says we have enough assets to cover the debt during M&A.”

Reality Check:

Accountants may base assessments on static balance sheets—but a true exit requires deep industry context. In our evaluations--often sought as a second opinion--we find that there is a general lack of insight among professionals around:

• Customer obligations such as deposits, postage, and work-in-process at the time of business transition.

• The hidden costs of disposing of equipment, including labor to run a press for showing it to equipment buyers and keeping the lights on during the auction process.

• The working capital necessary to implement the orderly wind-down, whether or not there was an M&A closing.

Essentially, there can be months of expenses yet to be incurred beyond what is accrued on the balance sheet before a business is fully wound down.

Guidance:

Generalists often miss the hidden value in customer relationships and data assets. In one case, a client was advised to liquidate immediately—but an expert second opinion revealed seven figures in intangible value. That value would have been lost without industry-specific insight into distressed M&A.

Misunderstanding 3:

“We’ll close the company and move the customers to a new venture in exchange for equity.”

Reality Check:

Customer relationships, data files, estimates, and job histories are corporate assets—not personal ones. While customer loyalty is important, the legal and financial value of those relationships belongs to the original entity and its creditors.

Guidance:

Attempting to transfer these assets without proper planning can result in litigation. However, if handled correctly, customer goodwill can be a powerful asset in a non-bankruptcy wind-down or M&A scenario that benefits all stakeholders, including creditors.

Misunderstanding 4:

“The leasing company will just take back the equipment and we’ll be done.”

Reality Check:

The occasional instance may arise where surrendering the equipment back to the lender is legally documented as the final and full settlement, however returning leased equipment rarely ends the obligation. Lenders typically pursue the full value of the lease, even after repossession, unless a formal settlement is negotiated.

Guidance:

Lease resolution requires negotiation and nuance. GAA’s experience shows that tradecraft and situational leverage—not boilerplate contract terms—often determine the outcome. Each lease scenario must be evaluated on its own facts.

Misunderstanding 5:

“We’ll shut the doors—creditors won’t get anything.”

Reality Check:

This approach invites serious legal consequences. Creditors may pursue officers for breach of fiduciary duty or fraud, especially if they detect an intent to dodge obligations. Conversely, a fair, transparent plan for addressing liabilities often results in creditor cooperation.

Guidance:

Stakeholders are more likely to support an orderly wind-down when they see clear intent to treat obligations responsibly. Early engagement with specialists in industry-specific wind-downs and expertise in special situations is key to building trust and avoiding litigation.

Closing Thoughts


Companies in distress need more than a generalist’s advice. Misunderstandings about liabilities, asset value, and creditor rights can turn an avoidable situation into a crisis. GAA’s Special Situations practice brings the printing industry expertise required to assess the facts, identify options, and create actionable paths forward—whether through M&A, restructuring, or a non-bankruptcy wind-down. Expecting the unexpected and preparing for the worst before it arrives can make all the difference.

Three Challenges with Loans and Debt Restructuring

From my front-row seat as a consultant specializing in distressed company debt restructuring, I can point out three challenges affecting the current environment for business loans and restructuring:

Borrowers are receiving less responsiveness from banks who outsourced loan administration while trimming the ranks in-house staff.

We have also seen an instance where the push-and-pull of negotiations slowed to a grinding halt as the lender rotated outsourced work from one firm to another, essentially forcing a do-over of facts, figures, and assumptions while the new firm got up to speed.

Requests for lien releases in the context of an asset sale have become complicated ordeals.

The SBA is hardly flexible when it comes to restructuring of debts that are covered by their blanket lien on all assets. The prevalence of SBA loans stemming from Covid-era government financing has increased the number of cases where UCC lien releases require specialized expertise. As a result, assumptions of what a bank may or may not do are less certain these days.

Technology such as auto-debits do not easily conform to the established norm of lender-borrower loan workouts.

We heard of a printing company loan workout where the lender was incensed when it learned that the treading water borrower allowed unsecured creditors to be paid ahead of the bank. The excuse that the controller was unable to turn off the auto debits for credit card payments fell on deaf ears.

Decoding Buyer-Seller Financial Dynamics

 

 

Your Money - Who Wants to Know?

Balancing Disclosure and Risk in Printing Industry M&A

Imagine you are buying a house, and the seller demands to know your remodeling plans and projections for future resale profits. In residential real estate, that request would likely be met with skepticism.

However, in the world of mergers and acquisitions (M&A), especially within the graphic arts and printing industries, sellers often expect a deeper look into a buyer's plans. Why? Because M&A deals often involve complex payment structures, such as earnouts, royalties, equity rollover, or contingent notes, all of which make the seller a future stakeholder in the buyer’s success. If the seller will be leasing property to the buyer or remains employed post-closing, their interest in the buyer’s financial health becomes even more justified.

Why Sellers Want Buyer Information

When sellers are offered performance-based consideration rather than guaranteed money, their future asset monetization depends on the buyer’s success. Therefore, they reasonably want to evaluate the buyer’s financial viability and growth plans to ensure that the business strategy is sound and that the buyer can fulfill their obligations.

Common questions asked by sellers include:

• Does the buyer have sufficient ability to finance future capital investments to grow the business?
• What’s the buyer’s transition plan?
• Does the buyer’s bank agree with projections for consolidation savings?
• How much working capital will be required post-acquisition?

Earnouts and All-Cash Deals

The choice of payment structure significantly influences the level of scrutiny from the seller. When an all-cash deal is on the table, the seller typically has no stake in the future business performance, reducing the need for in-depth buyer disclosure. The transaction is straightforward—the seller gets paid, and the buyer takes on full ownership risk.

However, all-cash deals are rarely available to sellers in the absence of stellar financial statements or a deep discount to fair market value. A word of caution for sellers: requiring an all-cash deal is an invitation for low offers. That’s because customer retention risk is inherent to printing industry M&A. Sharing of the customer retention risk is usually in the seller’s best interest to entice the highest possible offer. It is the role of the M&A advisor to balance the price and structure of the transaction to fairly allocate performance-risk.

Given that most acquisitions involve some form of risk-sharing, sellers want to know that the buyer’s plans  are feasible to achieve. Sellers want to assess the probability that performance-based consideration will actually be received.

The Value of Financial Transparency

As a buyer, it may be tempting to push back on seller requests for financial information but sharing select details early in negotiations can build trust and smooth the path to a successful deal. Buyers who provide financial statements, demonstrate creditworthiness and show strong supplier relationships can reassure sellers of their ability to deliver on future payments.

This mutual disclosure fosters a partnership mindset, where both parties are committed to the success of the deal and the post-M&A closing transition.

Planning for Financial Disclosure

Buyers can increase their chances of success by preparing financial documentation in advance. This homework includes consulting with their bank to confirm financing readiness and securing a solid credit rating. By being proactive, buyers signal seriousness and professionalism, which can lead to more favorable deal structures and stronger negotiating positions.

Financial transparency between buyers and sellers is the norm in graphic arts and printing company mergers and acquisitions, especially when earnout provisions or other risk-based payment structures are involved. Both sides are advised to share key financial details to build trust and ensure a successful acquisition. Buyers and sellers alike need to be prepared for two-way financial disclosure, helping them navigate M&A transactions with clarity and confidence.

Ultimately, the more informed both parties are, the higher the likelihood of success for both buyer and seller.