Anatomy of a £45m Irish printing deal

The £45 million buyout of one of Europe's leading printing groups announced at the weekend and spearheaded by two Irish businessmen took six months to put together.

Former Adare Printing director Patrick Crean and corporate financier Conor Donnelly have ended up with 50 per cent of Moore, which is the European arm of the US-based Moore Corporation. They are backed by two British and US-based venture capital companies, who own the remainder of the company and have been guaranteed debt facilities by GE Capital.

The company which had a $186 million turnover last year has been not been performing well, the two men said yesterday. However, they believe it can be turned around and hope to float it within five years.

"Around half of the business product sectors are growing, while the rest are in decline," says Mr Crean. He said the group, which has nine manufacturing locations around Europe, is on target to meet its turnover projection this year. He believes it can achieve operating profits of 15 per cent of turnover per annum, within three years.

Mr Donnelly and Mr Crean will become executive chairman and chief executive respectively. The group's operations are based at seven locations around Europe, with its headquarters in France. It employs in excess of 1,500 people, but only has a small sales presence in Ireland.

The two men have also invested their own money in the venture, but the vast bulk of it is coming from two venture capital companies - Alchemy Partners and Chase Capital, the venture capital wing of Chase Bank.

So why did the venture capital companies put their faith and their money into the two businessmen and their project?

"They said they had never seen that amount of due diligence carried out on one company before," says Mr Donnelly. The track record ofboth men in the printing sector also helped, he adds.

Mr Crean (35) was a founding management member of Adare. He has 18 years experience in the sector and one of his tasks while at Adare was to turn around Waddington Business Forms, previously owned by Waddington's which makes board games including Monopoly.

Mr Donnelly (45), who runs his own firm, Donnelly & Partners, was involved in advising Adare on several acquisitions, including Waddington's, Kalamazoo Security Print and Darley Business Forms.

While carrying out such work for Adare, Mr Donnelly says he always looked for under performing assets with a strong existing customer base. Waddington's was one such company, he says. It had £5.5 million in assets, but was losing £2.5 million a year.

It was bought for £1.5 million and "re-positioned" by Patrick Crean who went in as managing director. Crean says the company is now making profits of around £3 million per annum.

Mr Donnelly says his skill lies in his ability to do deals and to structure them in such a way that it gives the business being bought "a chance to achieve its goal".

He says structuring a deal is very important and he does not believe in buying debt. In the case of Moore, debts approaching $8 million were removed from the balance sheet.

The duo, who first met through Adare, said they initially examined the Moore Corporation's British operations. This includes a manufacturing operation in Sunderland. Some time later it became apparent the whole European operation could be bought. When seeking backing, Mr Donnelly says, they "didn't knock on too many doors". They had a track record in the sector and they also knew who they could do business with. Alchemy Partners, for example, was established more than a year ago, by two former Schroeder executives and currently has more than £1 billion under investment. The Moore investment represents the venture capitalists 23rd investment.

The Moore Corporation manufactures many printing products, including rail tickets for Iarnroid Eireann, the Metro in Paris, French toll road tickets, business forms and tracking forms for companies such as DHL. Its clients include Barclays Bank and United Parcel Service.

Following the acquisition, at least one Moore plant will close and investment in the remainder will run at $5 million-$10 million per annum. Mr Crean believes the European operations may have suffered, because they were driven by the US arm who may have applied their own culture to Europe - something which he says does not always translate.

"What we want to do now is give autonomy back to the local operations and get them to focus on their own markets," he says.

They say they are also structuring the companies to ensure that local management and employees get attractive share options. Up to 20 per cent of the company will be involved.

For now, they will concentrate on refocusing the European facilities which also includes plants in Holland, Portugal and Sweden. However, they are not ruling out further "bolt-on acquisitions" within two years, according to Donnelly.