SELL YOUR BUSINESS

“Why would I
sell my print,
sign or graphics
business now?”

“Buy low! Sell high!”

Are you actually mad? Sell up now? Surely any fool knows now is not the time to sell a business. Everything you’ve worked for, now, when we’re at rock bottom?

It depends who you listen to. We’re either about to enter the biggest economic downturn since the Great Depression of the 1930s. Or a recession on a scale not seen since The Great Frost of 1709.

Either way, hardly great.

We’re all in for one helluva ride.

Maybe you’ve thought about selling your business. Maybe you didn’t get round to it. Maybe you’re kicking yourself. You didn’t exit in the good ol’ days of 2019. When all you had to think about was Brexit.

Perhaps you had a buyer in the wings. Perhaps their funding dried up. Perhaps they’re slow pedalling to see what could possibly happen next. Perhaps they’ve taken fright.

What’s plan B?

Wait for the world to return to some sort of normal? Next year? Around 2025 or so? A decade from now?

Why would you even consider selling your business now? Your life’s work. At the start of a recession. For pennies in the dollar.

Maybe it doesn’t have to be like that.

We’re looking for sign businesses like yours, to roll-in to Grafenia. Maybe we’ve found a way that works for us both. A way that means you can see your way through. Secure your future. And write a new chapter in your story.

Because, maybe there’s more we can do together.
Now, come. There’s no time to lose. Let’s roll.

Peter Gunning
CEO Grafenia plc

Who the plc are we?

It’s possible you’ve heard of Grafenia. It’s also possible you haven’t. Either way, you certainly know our most famous brand, printing.com. We’ve been in the print industry since the 90’s in one shape or another.

You might be a customer (well, thank you). Or have cursed us as a fierce competitor (sorry not sorry). You might even be a shareholder (thanks once again).

For nearly two decades, we’ve been a public company, listed on the London Stock Exchange. Living life in public has its challenges, but it also comes with many advantages. One of those is access to capital, and patient shareholders.

As our industry has changed, we’ve changed with it. We’ve launched some new brands over the years, to adapt to what clients want. One of those is Nettl.

You’ve spelt that wrong?

Haha good one. Dropped an ‘e’, mate. Heard it before, mate. Don’t get stung. Honestly, these never get old.

In our company-owned stores, we had seen first-hand how client behaviour was changing. How our market was converging. Printers selling signs. Web designers selling print. Sign businesses selling websites.

So in 2014, we launched Nettl. It’s now the UK’s largest network of neighbourhood web, print, sign and design studios. We service thousands of clients through over 230 locations sprinkled around the globe. You’ll find Nettl studios in America, Australia, Belgium, England, France, Ireland, Netherlands, New Zealand, Scotland and Wales.

230

Nettl locations operating in 10 countries

What’s this got to do with you?

Through our Nettl locations and our distribution network, we sell print, display and signage. Recently, exhibition stands might have been replaced with social distancing collateral, but our customers are buying. They’re all over the country, from every sector. From one-woman-bands to multi-national mega-corporations.

As well as physical marketing, we design fancy websites with online bookings and sophisticated ecommerce sites. We tinker with digital marketing and we optimise sites for search engines.

Most of what we sell, we make in our own factories. Our clients need signs and vehicle graphics installed all over the country, so we complement our own fitting teams with subcontractors.
We’re building a national installation network. And so now it’s about you.

ROLL YOUR BUSINESS INTO GRAFENIA

Right, are you right?

THE RIGHT SECTOR

We’re fascinated by blockchain and fintech and drones and maglev trains, but we’re only interested in acquiring sign and print businesses. Sorry.

THE RIGHT REPUTATION

You own an established graphics business, with a flawless reputation. We won’t uncover a history of dodgy dealings or skeletons in your spray booth.

THE RIGHT SIZE

Before the pandemic started, your annual revenue would have been over £2m. We’d expect your gross margin would have been above 55%.

THE RIGHT TEAM

You’ve grown something to be proud of. You’ve put strong foundations in place and have second tier managers who you trust and rely on.

THE RIGHT STAGE

Maybe you’re thinking about an exit now, or in the future. That’s ok, but we’ll need you to stick around until things get back to normal.

THE RIGHT FIT

Our combined team will need to get along. We think cultural fit is insanely essential. If we don’t click, no offence. But it won’t work if we don’t.

Where could I be located?

Your business will be based in the UK or Ireland.

Our main production hub is in Trafford Park, Manchester. We’re looking for other businesses which could become regional hubs. Our preferred locations are:

Greater London or South East England
Bristol or South West England
Birmingham or The Midlands
Central Scotland

Don’t worry if you aren’t based in one of those. We will consider other locations. Or if your lease allows, explore combining our facilities in Liverpool, Exeter, Birmingham or Manchester with yours.

BECOME PART OF OUR NATIONAL INSTALL NETWORK

What happens to my brand?

Your clients know you. They know your name. So it makes sense to keep the brand you’ve established.

You’ll also co-brand and become a Nettl Works. We already have Works Manchester. You’d become Works Bristol or Works Birmingham or Works Whatever. You’ll connect to our distribution network, so you can supply products and installation services to Nettl clients and partners in your local area.

To process those orders, we’ll need to integrate our bespoke supply chain system, w3p.

So I need to change my system?

Yeh. We’ve developed our w3p system over the last two decades. It runs our entire business. From website design to invoices. Collecting direct debits to moving conveyor systems. It’s cloud-based and connects our customers with our stores and our partners to our production hubs. It’s truly unique and licenced around the world.

You probably already have a management information system running your factory. To begin, we’ll run systems in tandem. Then, to get full benefit, we’ll migrate your system to w3p.

If you’re interested to learn more about w3p, we’ve written a book which explains what it does. And why it does it.

Download

Free 148 page PDF ebook

What will happen to my team?

We’d expect you to keep managing the business. That means having the right mix of people and being the right size, given the current climate.

Having multiple production facilities within the group means we can manufacture some items centrally, more efficiently than locally. Maybe that means moving some machines to other locations.

One of the benefits of being part of a bigger business, is some back-office functions can be centralised. That’s finance, bookkeeping, auditing, IT support, marketing and software development. There may be some duplication of roles, although we always prefer to redeploy people where possible.

What machines should I have?

That’s not too important. Clients don’t care about machines. They care about getting more customers.

We’ve always been firm believers in showing the buns, not the ovens. The same applies when buying businesses. We don’t get excited about plant lists. You should have the capability to deliver what clients need. Graphics, fabrication and installation. You’ll probably have printing and cutting machines. Flatbed, large format digital inkjet devices, CNC cutter/routers, finishing machines. All the same stuff everyone else has.

If you outsource some stuff, fine. There may be things we can in-source from other parts of the group. For sure, all your litho printing.

If you have special niche capability, cool. Clients love fancy things. If you make something spectacular, we’ll help productise it, so we can sell it throughout our network.

Does my product mix matter?

Ideally, you’ll have a broad client base. You won’t be reliant on a single client for more than a third of your revenue (or profit). And you’ll have a mixture of products and services in your arsenal.

The economy is in a state of flux right now. Nobody can know for certain how long recovery will take. Different parts of our industry have been hit harder than others. Exhibitions were one of the first sectors to suffer and they’ll probably be one of the last to recover.

Sign companies with exposure to retail chains or those in casual dining and hospitality may be particularly badly affected. Those working on government or local authority infrastructure projects, less so.

If you’ve been able to pivot to supplying social distancing paraphernalia, you’ll be in a stronger position than competitors who have hibernated.

LET’S TALK ABOUT THE FINANCIALS

How do you value my business?

Ah! The million dollar question. It’s clear that almost every business is worth less than it was in February 2020. The pandemic has caused a downward pressure on share prices.

As we said at the start, nobody wants to sell a business at the bottom.

So we’re valuing decent businesses at their “Pre-Corona” levels.

We pay 2-5x EBIT, adjusted for director’s costs. Why the range? Our valuation is lower for smaller deals and higher for larger businesses. That reflects the deal costs, which don’t tend to fluctuate.

What if I made a loss this year?

It’s understandable. Lots of factors worked against business over the past twelve months. What with disruption to demand, caused by leadership contests, elections and Brexit negotiations. Then rising energy costs, living wage increases and material price hikes layered on top.

We look for stable businesses, who’ve had consistent earnings or shown growth over the past four or five years.

When we calculate our valuation, we look at the typical profits over the whole period. That means that blips and weird peaks can be normalised.

We’ll just need to understand what needs to happen to return the business to profitability.

What if my business needs cash?

Something like half of all businesses in the UK say they’ll run out of cash in the next three to six months. Maybe that’s been keeping you awake at night. Many owners have been pouring over forecasts, trying to work out when their cashflow crunch will hit.

The Government job retention scheme, local authority grants and bounce back loans have been remarkably supportive so far. When those measures end, some businesses will need funding.

As a public company, we have better access to capital than most private businesses. If you become part of Grafenia, we might need to inject some working capital. We’d do that as a loan to the business. Only when the business starts to generate cash again, would loan repayments start.

If you have an immediate cash requirement, it’s best to be open and upfront with us. We can move quickly to avoid insolvency.

How will a deal be structured?

We’d acquire 100% of the share capital of your business. Your shareholders would sell their shares to Grafenia plc at the valuation we agree. You and your team would become part of the group, as employees.

We think it’s important you’ve got skin in the game. So around half of the consideration will be paid by issuing shares in Grafenia plc. If we can execute our model together, there’s further upside potential for you. As our shares are publicly listed, your shareholding becomes liquid and allows for full or partial exit after a few years.

The other half of the consideration would be paid as shareholder loan notes. Once your business is generating cash again, and it’s paid back the working capital loan, we’d start paying back the loan notes, typically over 3-5 years.

This structure means you get the benefit of a valuation, based on pre-Corona, historic performance. And we both share the risk around how long it will take to recover to that historic performance.

When will I be able to exit?

Maybe you weren’t thinking of an exit at all. You’ve been doing just fine yourself. That’s great. Perhaps we can do more together. Your energy, our systems. Your leadership, our sales network. We need talent to help us deliver our goal of becoming the most famous network of sign, web and print studios in the world.

You might have been dreaming of retiring to Ibiza soon. Or moving to the country and becoming an Alpaca farmer. You probably deserve that.

We’ll just need you to stick around a bit longer.

We’ll need you to run the business until we’ve returned it to profitability and there’s a competent second tier of management in place. Then, Cafe del Alpaca beckons.

How painful will this be?

Clearly nobody was expecting Coronavirus to shut down the whole economy. So, the short order answer is the future looks extremely tough. You’ve probably already got to that conclusion.

But there is strength in being part of a bigger organisation.

You might be used to working for yourself, calling all the shots. Maybe you don’t think of yourself as ‘corporate’. We’re a listed company, so you’d expect there are more rules we have to follow.

However, we have patient investors. They favour investing for the long term – maybe 10, 20 or 30 years.

It doesn’t have to be painful. Together we can be stronger and come out of this period with a bigger market share. What’s more, you can still realise the value of the business you’ve built.

What are we like to work with?

So far we’ve brought six businesses into the Grafenia Group.

Some vendors left the business before acquisition. Some planned to stay for a year or two later. Others remain in the business, in different roles to where they started. One left to start a Nettl store and farm alpacas.

The biggest deal so far was Image Group in 2017. In 2019 we combined two factories into one, in Trafford Park. Our two blended families have learned to work well together and opportunities have arisen for team members to cross family lines.

Be candid with us about your personal circumstances and objectives. It’s best we know what you want to achieve, so we can work how they fit with ours.

What’s the next step?

Let’s have a brief chat.

Email letmein@grafenia.com and arrange a time. Just let us know your approximate revenue for last year and your location.

On the call, we’ll explain our vision and answer your questions. We’d like to hear about your history and hopefully our combined future. We can chat through the headlines and the finer details without any obligation on either side. If you need an NDA that’s no problem – just let us know beforehand.

After the call, we’ll need your most up-to-date accounts and then we’ll take it from there.

We’re an experienced, well-funded purchaser with a mandate to acquire businesses that fit our criteria and strategy.

We can meet the needs of serious vendors.

Are you in?