20 March 2017 Business

The deal that represents the best of both worlds

The GI Solutions acquisition of Eclipse is a deal that is the very definition of amicable, highlighted by the presence of the leaders of both companies at Hunkeler Innovations last month.

The acquisition of Eclipse by GI Solutions announced last month was the culmination of a nine-month-long period of discussions and negotiations that stretch back to the MBO of GI Solutions.

Even at that point there was an understanding that GI Solutions would need to grow through acquisition as well as through its own organic means. Quite simply as a stand alone business, GI Solutions would be a tasty morsel for an aggressor. Rather than be consolidated, GI Solutions chief executive Patrick Headley would be the consolidator.

“We didn’t want to be part of someone else’s dream,” he says.

“I have always admired Eclipse, the quality they produce and everything about them. It has increased turnover over the current year and increased profitability. We have paid a decent price for a quality company,.”

The strategy is to become a £100 million turnover business and with £20 million of sales from Eclipse, it is a long way there. GI Solutions chief executive is in the throes of final negotiations with a further acquisition which may or may not take the group to the milestone figure. Understandably, he is not saying.

But it is not merely about acquiring extra revenue. There is a good fit between GI Solutions and Eclipse, not only that the two businesses are not too far apart in the East Midlands. GI Solutions has its operations at a single site in Leicester where it is an increasingly digital operation, producing transactional and direct mail.

This will involve adding litho printed marketing collateral to an envelope with a personalised letter printed on a Screen TruepressJet 520 or one of its pair of HP T230 inkjet presses. An HP T490 takes quality of digital printing into litho replacement territory (see last issue).

Headley is a firm believer that direct mail is on its way back, as marketers discover that while email marketing is a highly measurable channel, it is increasingly difficult to achieve the cut through needed to capture a prospect’s attention.

Marrying the email and a piece of print can deliver the impact that is needed. It has a venture called Paperplanes to address this opportunity. More than 120 young digital savvy marketing executives came to a seminar about what is otherwise called programmatic marketing. In short campaigns can be set up to send an email to somebody filling a shopping basket on a web page, but not completing the deal.

And this can be followed up 24 or 48 hours later with a printed and mailed version of the same offer. As this is personalised, the return on investment can be calculated. There is also the opportunity to run A/B trials. The fluidity and flexibility of digital media is coming to print.

“Someone who has been browsing a website and specifying the extras they want on a car, its colour and so on, can be sent a personalised mailer inviting them to call their local dealer to set up a test drive,” says Headley. “It’s part of my quest to get mail back into the media mix.”

Eclipse adds to GI Solutions product mix. It has been on the same journey under Simon Moore, albeit coming from the opposite direction. Moore could see the advantages of joining forces with the larger company. Its strengths have been in offset printing, for example, catalogues that are mailed to consumers that have bought through a website and designed to encourage further purchases through the website. The litho catalogue is polywrapped with a digitally printed carrier sheet.

Eclipse brings significant litho printing capacity, thanks to two Goss M600 web presses and two Heidelberg long perfectors, one with eight Kodak Prosper inkjet heads for inline personalisation. This will fill a gap for the Leicester company which has focused on highly personalised print.

Headley says: “We are great if the need is for personalised product, indeed I would say we are market leaders in terms of anything personalised. But as soon as something needs to be included in the pack, we could not get anywhere near the price. Eclipse gives us that commercial activity.”

Moore will join the main group board ad will continue to look after the Eclipse site in Kettering. “When GI approached us and asked would we like to sell the business in May last year, it made complete sense from a strategic point of view.”

Both were visiting Hunkeler Innovations Days in Lucerne last month where they were looking at developments in inkjet printing. There is a need for at least one machine for 4DM, the Eclipse digital print arm on a separate site in Kettering. This has only run with cut sheet machines until now.

Headley, who sees this as the ideal disaster recovery option for the Leicester, needs to install a web press. “While we are committed to HP, we want to look at everything on the market. We want to look around,” he says. “We will look at the Ricoh as that has started to print on standard offset papers. The HP needs some coating as well which we are fairly happy with. The T490 is in place, but the finishing line has been delayed a month to include some changes. It is all coming together.”

Moore adds that Eclipse had recognised that it needed to boost the 4DM capacity even without the acquisition. It needed to be able to offer a true white paper solution he explains. Conversations to that end had started before the deal with GI Solutions.

Moore bought 4DM to add to Eclipse in 2011, beating GI Solutions to the deal. Five years later, GI Solutions has completed the deal.

It has been one of those rare deals where the term amicable really applies. Staff at both companies have welcomed the deal, even the semi retired finance director has been coming in every day, says Headley.

Moore continues: “Both parties were willing: it was just the right thing to do. Staff can see the positives and have been very receptive. And we have received nice comments from customers and suppliers alike who see the reality of the situation."

The deal was supported by HSBC which had backed the management buyout last year. A due diligence report was produced by CLI, the agency which had investigated the market to support the YMG acquisition of The Lettershop Group. Negotiations were eased because both companies have been successful and achieving the target figures exported so there was no need to revise valuations to cause potential resentment.

The talks began with the Brexit vote in the background and the result of the referendum led to a brief pause. “On the Friday we quickly decided we should carry on,” says Moore.

Headley had hoped to complete the two deals simultaneously, but this has not proved possible. “When we started we wanted to run two deals at the same time. It was always in my mind that one might not come off. This was a very collegiate deal. It is a great thing when buyers are happy to buy and the sellers are happy to sell.”

The task now is to bring the businesses together, to change two separate cultures into a single culture across the larger group. This will draw on best practice arrangements for the different partners to achieve a common set of standards and procedures. It will not be one company imposing its ideas on the other. For example, Headley notes that Eclipse has a strong MIS and IT set up that GI Solutions can benefit from.

This task will be helped by management at both businesses coming into frequent contact, even moving between the companies. “We are sitting down together and learning about the businesses and getting the first hand experience of each other we could not do before the deal was completed.”

Moore reckons that the companies have only 10-15% of customers in common, creating opportunities for cross selling a wider range of services. “I believe that going forward we have the scale in the business which puts us in a strong position,” he says. “GI Solutions has a very strong data business with its Insight operation which is a requirement that our customers have. It takes a while to build a business in this area with the credibility that is needed. GI already has that.”

The group now has the size where it can look forward with the confidence that it can decide its own future. A smaller business is always vulnerable to being swallowed by a larger operation. The implication is that in this sector at least, size matters.

Headley remembers when Graphic Inline, the business that developed into GI Solutions, was first set up, the directors were approached by rival business Chorley & Pickersgill. “They wanted us out of the market place,” he explains.

Chorley & Pickersgill has evolved to be a crucial part of the Communisis business having itself gone through changes of ownership on the way. It is not a path that GI Solutions wants to follow. It wants to set its own direction.

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Patrick Headley

Patrick Headley

“We didn’t want to be part of someone else’s dream,” says Patrick Headley.

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GI Solutions buys Eclipse to build DM powerhouse

GI Solutions strikes with litho replacement HP

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Simon Moore

Simon Moore

Simon Moore will join the main group board ad will continue to look after the Eclipse site in Kettering. “When GI approached us and asked would we like to sell the business in May last year, it made complete sense from a strategic point of view.”

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Eclipse begins installation of Kodak Prosper heads

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