Letters, feedback, get it off your chest: 28 September 2011
Strong response to our publisher’s letter this week, as Patrick Howard’s reflection on private equity within the industry draws quick reaction.
Re: Equity is a broad church - Letter from the Publisher – Patrick Howard
What is Patrick Howard smoking?
Is he on the pay roll of the big equity companies in their spin department? The equity companies and privately owned companies are like chalk and cheese. A dose of reality is that the big equity companies have destroyed medium-size companies in a way that no other has, recessions included.
Firstly, pricing strategies with them, it’s easy as the money is borrowed. The consequence of not really doing well is that it is not their money; it’s someone elses. Just a Dear John letter and move on to the next bunch of suckers.
Whereas an owner-operated business puts everything on the line, a lifetime of work, and his own private cash. When he goes under everything is gone, not like equity companies that close up shelf-company 268 and move on with your other bits and bobs.
The other side of the coin is because of slimmer margins; the first thing that goes is training. No more taking on apprentices and trainees, as you just can't afford them anyway. There is plenty of redundant print staff looking for a job.
All print, no matter what you are in, requires investment into an updated front end, MIS systems kept up to date, and new technology. We would all love the new Komori coming out with UV drying and the latest Fujifilm 720 ink jet machine, along with the new Indigo 7500.
But guess what Patrick, you have to charge enough to pay for them. We don't have access to interest free loans, and the possibility of $104 million dollars of bondholder’s money free of charge to fritter away at our leisure. If we did have it, the above would be on my shopping list.
Phil Jones
Managing Director
Thames Publications Ltd
Wellington, NZ
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Phil Jones' sentiments, robustly expressed in his letter, are felt widely by sectors of the industry, in particular:
- SME printing firms with sensible pricing structures trying to compete with quotes that defy financial rationalism.
- The unfortunate 'no-man's land' investors who bought bonds, but whose voice was shouted down by the more powerful PE clout.
- Those who have lost their jobs in what were previously well-run and profitable family companies, either closed down or savagely downsized by PE razor gangs.
But there's good, bad and indifferent PE money just as there are good, bad and indifferent privately owned printing shops. I think Patrick Howard's article was bringing this out, rather than flying the flag for PE as Phil Jones thinks.
What he may not know is that in the same printed-version of Print21 magazine was another article on PE written by James Cryer "Seven Tests for Private Equity." Phil Jones might find Cryer's position a little more aligned to his own views, and yet it was published and vetted by the same person he accuses of being in-league with PE supremos. Such is life in the media.
What stands out, as a serious flaw in the printing industry on both sides of the Tasman is a lack of clear, cohesive Succession Planning. So, when a PE-backed outfit comes along waving wads of cash in the face of a 60-something business owner whose kids are not interested in taking over and whose staff can't afford their own MBO, the temptation to take the money and run is overwhelming.
This is what happened from 2003 on when the Kiwi-led, (by Geoff Wilding of Pacific Print Group), PE deals started in earnest.
Phil, I don't disagree with some of the things you wrote but I think you misread the meaning of Patrick's Publisher's letter. Oh, and I happen to know he's a non-smoker.
Andy McCourt