It is about lunchtime on Friday April 11 this year and the Australian printing industry is awash with rumours that the $40m visionary, environmental pioneer Focus Press is in deep trouble. Unable to pay suppliers and facing an exodus of clients, the company tells most of its staff to stay home and starts shopping itself to three potential buyers.
Right next door to the Focus Strathfield site, BPA Print Group boss Mark Shergill gets a call from a worried client asking if everything is okay. It is the first indication that his neighbour, a company he had looked up to as it expanded to Canberra and Wollongong in the space of a year, is days away from a spectacular collapse.
“I couldn’t believe it, Focus had such a great name in the marketplace and was talking about buying STI,” he says.
Three hours later the news breaks and Shergill calls Focus managing director David Fuller to see how he is going.
By Monday morning the three bidders have pulled out and the printer appears headed for total destruction. Staff morale is at rock bottom and without paper and other vital supplies coming in, Focus will struggle to make it through the week.
Shergill is no stranger to salvaging distressed companies, having bought three the previous year, and knows he has to act quickly to have any hope of keeping many of the clients on board. The next day he commits to buying the Focus client list and much of the kit. A week later the deal is done – the quickest and easiest buy ever.
Or so he thought.
[Related: Read the whole Focus Press saga]
The trouble with making a deal for millions of dollars in printing equipment from a distressed company is that the company tends to owe every man and his dog many millions more. Focus owed its creditors $27.3m at the least when it went into liquidation less than two weeks after Shergill’s deal closed, and everyone wanted their money.
The banks were first in line, Focus having borrowed for everything from equipment, to site construction – to the tune of almost $6m – all of which was secured. Equipment manufacturers like Heidelberg, Fuji Xerox, Canon and KBA had all financed equipment, and the government was owed $5.5m in grant money for the $12m Wollongong facility that had opened only months before.
“Focus was the messiest deal I’ve ever made,” Shergill says, and it got messy quickly. Two liquidators were called in, and Shergill found himself having to renegotiate the terms. Weeks later the Commonwealth Bank hired Cor Cordis as receiver-managers to secure its $2.1m. Shergill was told he couldn’t have everything he had agreed to, and just when he had almost struck a new bargain, the National Australia Bank, owed $4.5m, brought in McGrath Nichols over the top – who insisted everything had to go under the hammer no matter what Shergill offered.
Though Shergill had planned to consolidate Focus production into the Strathfield South site next to his own, once the kit was up for grabs he had to close down everything at the former Focus site and let most of the staff he had tried to rescue go. “There were so many parties involved and so much of the equipment was financed. Everyone wanted their money back and the liquidators were in no hurry to stop being paid,” he says.
The auctions did not begin until August and Shergill did not get everything he wanted, although he did snag a 2007 Komori Lithrone LS1040P 10 colour press for $455,000 and various bits of finishing and prepress gear – at a much lower price than he had initially offered.
As the process dragged on seemingly forever, Shergill’s plan to retain half the Focus client list evaporated. Sales reps bailed almost immediately, with a group heading to a big competitor within days – likely having seen the writing on the wall much earlier and secured lifeboats.
In an attempt to keep clients for themselves, the former reps started saying BPA did not have the necessary resources to service them. Many lost faith or decided to wait until the dust settled and never returned. By the end, Shergill had about 10 per cent of Focus’ business still attached to his newly christened Focus Print Group.
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Focus was not Shergill’s first rodeo, his education in running a print firm began decades earlier. The year was 1986, the Pope was visiting Australia, John Farnham’s ‘You’re the Voice’ was topping charts, and printers attended the best ever drupa while radiation from Chernobyl wafted over Germany.
A 20-year-old Shergill was selling franking machines at a company called TAC, when a print veteran, whose business had just been bought out by TAC, suggested they start their own business. The pair formed Jamar Printing, a portmanteau of their first names, in Marrickville with a Davidson 500 they bought second hand for $500, printing stationery and business cards. A year later a third partner joined them.
The triumvirate grew their business for 14 years, moving into a bigger factory in Botany and beginning to acquire other small firms in the late 1990s. It was then Shergill met David Fuller for the first time as he was in the market for prepress gear. A hands-on owner from day one, Shergill taught himself to use Macintosh prepress software. Fuller was an early adopter of CTP technology and was happy to offload his film setup to Shergill’s business. Little did they know how their fates would intertwine 15 years later.
In 2000 one partner retired and four years later Shergill bought out the other to take sole control of the business with his family. He kept buying other print businesses, at least 12 since the beginning that he can remember, and says those experiences helped him tackle bigger fish later. “It is a good way to grow but it does not always work out as you hoped and there are some deals I wish I hadn’t made,” he says. “I made some mistakes, like changing the names of companies I bought too quickly – clients don’t like change and can get spooked. But you learn from mistakes and it helps you do better next time. If an opportunity comes up you take it and run with it. If I’m half confident I can make it work, I’ll do it.”
While Shergill made a name for himself last year buying distressed printers, and even more this year with Focus, he says this is not so much a strategy for him as seizing opportunities. Most of his acquisitions were healthy businesses as a going concern – like PurePrint which he bought in June. “They might be cheaper, but that’s because they have less value. You have to realise going in that you will not be able to keep all the business,” he says.
“A lot of owners think they can trade out of a hole and leave it too late to sell while the business is still viable. You have to act really fast or the goodwill is gone. A lot of clients will use a printer collapse as an excuse to get out of print, so at least if you buy the company you might be able to keep them, along with saving the jobs of at least some staff. Look at Geon, they were turning over $400m and much of that work has vanished.”
Any printer who has merged with or acquired a company will tell you it is hard to amalgamate the operations, especially if you take on lots of staff. Shergill says about half of his employees, including some key figures, joined the company when he bought out their employer.
“You need a strong core of experienced staff and a healthy, respectful culture. Then when new employees come into the business they adapt to how we do things quickly,” he says.
“It is a younger team led by a younger director where everyone is civil and respectful to each other. Particularly if people have gone through a liquidation they can be quite edgy as they have been burned before, so you have to show them you do things the right way. If people enjoy coming to work you will get more out of them and they will stick around, that’s half the battle.”
Shergill’s method of creating a working environment people want to be part of is to lead by example, with a strong moral compass. Having built the business with his own hands, he says he has always been involved in every aspect. “I have always tried to know how to do everything in a printing company and what it takes to do every employee’s job,” he says.
“You build a culture of not asking someone to do something you wouldn’t do yourself, and staff see that and respect you for it – and no one can say something can’t be done in time because I know from experience.”
As a family company, these are values Shergill has passed down to his children with the help of his wife, who has supported him from the beginning. His eldest son Rohan, 25, now runs the Melbourne arm of the business, and Shergill is impressed with how well he has developed in only six years.
“He has come such a long way since he started and I rely on him a lot. I have complete trust in him and he is someone I can turn to for another opinion,” he says. His other son and daughter, now in their early 20s, are also major planks in the growing print empire and Shergill is confident they will eventually be able to take over from him.
“Being a family business makes running everything much easier because you can have total trust in them to do what is best for the company,” he says.
“They are involved in every aspect of its operations so they can learn for when they take over one day, and they know they are helping themselves by helping me.”
[Related: More ProPrint features]
By 2013 Shergill was battle-tested enough to hit the big time. He had just bought Melbourne printer NewTone, his first interstate acquisition, when he heard about the demise of the 109-year-old BPA Print Group and initially thought it was based in the nearby Sydney suburb of Burwood, not Burwood, Victoria.
Interested in buying a business close to his Strathfield South base, his company by now called Print Warehouse, he called to ask about it and discovered its real location. Fortuitously, Shergill was flying to Melbourne the next day to move the NewTone warehouse and decided to have a look while he was there, otherwise the buy would probably never have happened.
Six weeks after BPA’s collapse, Shergill had backed himself and taken out big loans to buy the company, along with liquidated Gold Coast printer Dynamic Print Communications. A few months later he bought another Melbourne printer, 153-year-old Troedel-Docucopy, after it too fell into liquidation. Shergill rented a unit in Melbourne for 10 months to sort out the BPA acquisition.
“Big and small acquisitions are really the same process – they take almost the same work, just higher financial risk. It was a big job and a huge investment for us, but you have to be confident in yourself, and I’m confident that in the end the return on investment will be great for us,” he says.
“You can’t stand still in today’s industry, you have to be active and dynamic and seize valuable opportunities. You have to be willing to commit, and to trust your staff to keep everything running while you make it happen.”
Pulling off this string of difficult acquisitions, and all those that had come before, made him able to think taking on something like Focus was possible.
Six months on, Shergill says the Focus situation has stabilised. He is hiring sales reps again to go after lost business, and is confident clients will return to the fold.
Getting even some of the Focus kit and business will give him full offset and digital capability across three states, making it a deal too good to pass up even though it was harder than it should have been.
He says the next step is to fully integrate the entire empire, make sensible investments and consider diversifying into other markets like wide format, and even products and services outside of print, like plastics. The future is bright, he says, and print will still be there for his children to profit from.
“Print is fighting an uphill battle with everyone pushing for a paperless society, but I think it still has a market and we need to promote it and build it up,” he says.
“People will realise the value, especially if we integrate print with marketing and other mediums and offerings. But maybe that is something for my kids to take the lead on.”
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