Print Management: The next link in the food chain

DPWN's #252m purchase of a controlling stake in Williams Lea is part of a trend in complementary acquisitions, says Tom Hawkins

Williams Lea, a major name in the British printing industry for 185 years, last week handed a controlling stake in the company to German postal operator Deutsche Post World Net.

The #252m investment gives DPWN 51 per cent of Williams Lea, which is expected to expand over the next few years. The shareholding was made possible after investment capital firm 3i relinquished its 38 per cent stake for #110m with the remainder coming from the Williams Lea family's 30 per cent ownership.

For Williams Lea the deal provides solid financial backing and access, via DPWN's global customer base, to major document management contracts. For DPWN, the deal extends its ownership of printed documents from delivery back to the point of creation.

The news comes just as the UK postal market welcomes access from competitors to Royal Mail and other international postal markets become liberalised.

As such it is a dramatic symbol of the shifting ownership of the printed document. The ongoing demand from global corporations, particularly in the financial services sector, to protect their brand identities while reducing costs means that consolidation in the links of the document chain is inevitable.

DPWN has certainly put its faith and money in this strategy. Last year it purchased UK logistics firm Exel and last week issued a confident earnings forecast of E5 billion (#3.42billion) in 2009.

Klaus Zumwinkel, board chairman and chief executive officer of DPWN, said: "It is now clear that our corporate strategy over the last few years is bearing fruit."

While logistics and postal services have matured, print management is a relatively new market.

As such logistics operators have been making tentative moves to exploit the market opportunity.

Prior to the Williams Lea deal, DPWN's DHL Global Mail business had already dabbled in print by offering direct mail, personalisation, polywrapping and inserting for publishing clients such as Reed, Euromoney and Haymarket.

In addition, another entrant to the liberalised UK postal sector, TNT Mail, has strengthened links to sister company Cendris in a bid to provide document management as another service. Indeed, Cendris is rebranding as TNT Document Services to centralise the group's service offering.

What these collaborations show is that complementary acquisitions are the fastest and safest way to secure a chunk of this market. The print demands of clients require huge volumes of print turned round quickly and to exacting quality standards. So, rather than lining up to compete against them, postal operators look set to lean increasingly on the expertise of print management companies.

In turn, these will be forced to forge stronger links into the printers on which they rely. For example, online job submission and ordering as well as soft proofing systems, already growing in importance, will become essential tools to improve customer service.

For printers, the emphasis will be on streamlining the flow of the incoming information through the factory. MIS, workflow and JDF connectivity will be essential technologies to eliminate waste and provide the service required by the organisations that control the print budget.

But this trend will not result in all printers becoming distilled into pure manufacturers. At the other end of the spectrum, printers will look to expand their services beyond print and further up the food chain to gain more control of document creation.

Evidence of this can be seen in RR Donnelley's acquisition of Astron last year. Similarly, large UK print groups such as Polestar, St Ives and Wyndeham have focused greater attention to print management and value-added services such as distribution to keep profitability.

Therefore, the battleground for control of corporate print budgets looks set to pitch logistics giants with print capability against major printing groups with logistics capability. In either case, the act of printing becomes more embedded in the document supply chain rather than being offered as a standalone service. Success will be defined by making the links both up and down the chain stronger.

What Williams Lea said about the deal

Tim Griffiths, chief executive

"We are delighted with the outcome of our recent negotiations and Deutsche Post World Net's decision to become our principal investor. Their business is wholly complementary to ours and we are eager to draw on their extensive business experience as a major global organisation in international mail logistics."

The details:

Under the terms of the purchase, Williams Lea will be merged into Deutsche Post's DHL Global Mail business, which is gearing up for a big assault on the liberalised UK postal market.

The German postal giant is aiming to take control of the outsourcing specialist, which helps broking houses distribute analysis and handles the mass of paperwork from the likes of Abbey, The Prudential, Norwich Union and Axa.

Taking a controlling share will give Williams Lea strong financial backing to invest in the latest technology and key information to expand its empire.

Williams Lea is one of the leaders in the field of value-added document and mail-related services.

As an international services provider, the company has significantly strengthened its US presence over the last few years through organic growth and acquisitive growth, with offices in many US cities including New York, Chicago, Los Angeles and San Francisco.

By joining forces with Williams Lea, Deutche Post's international mail- related business in the US will grow considerably.

As the largest private provider of mail services in the US, the company will now become the leading full-service supplier in the US mail market.

`We are eager to draw on their experience as a major global organisation'

Views from the boardroom

Tony Massey, HH Associates, group sales and marketing director:

"With two world-class acquisitions – in the shape of Astron and Williams Lea – I think you'll see a lot more interest in the industry.

Seeing two pioneers lead the way is great news.

Williams Lea-Deutsche Post group is now a Leviathan, and it keeps you on your toes.

We wouldn't complain about their pricing levels or anything else because we think that competition's healthy.

It's great news that the UK market is leading the way and it shows there's interest in investing in it.

We're yet to see what the impact will be but I think it's fantastic."

Mark Scanlon, CDP Print Management, managing director:

"It's no surprise because the long-term aims of companies like Williams Lea, Astron and Communisis are to maximise their share value.

I see the sale as a positive move for the industry because with companies like that, all they really offer is driving prices down. Maybe now Williams Lea has achieved its aim of selling out then we may see some normality return to the market.

I think the next firm that will look to sell out is Communisis, because it is targeting much smaller print management contracts than they used to and very aggressively too. It shows there's a lot of effort in getting more contracts to increase the share price."

Keith Walton, Etrinsic, ceo:

"I'm not surprised by what happened with Williams Lea: they were either going to float on the stock market or get big investment from somewhere across the water.

I think it's all to do with the mailroom angle because Williams Lea gives Deutsche Post World Net a link into the post rooms of big companies.

Our skills set is print management and we're focused on that. We've got no intention as a company to go into facilities management.

I can't see it affecting us that much. I don't know whether Communisis would do that. After all, they're a hardened printing group so I don't really see them going down that route."