American Reprographics Company
Example of Industry Consolidations:
Over a nine year period, the principals of what is now American Reprographics Company (“ARC”) acquired majority interests in five west coast reprographics companies using their own capital as well as loans which they personally guaranteed. Recognizing the benefits of scale and having been successful in their prior acquisition efforts, the principals were eager to lead a consolidation of the fragmented reprographics industry. However, the principals did not have the resources to lead the consolidation independently and thus considered seeking an experienced partner.
ZS structured a transaction whereby the principals received a substantial amount of cash, some notes, and a 50% ownership stake in ARC, a newly-formed company which purchased the five predecessor companies. In addition, the principals were relieved of their personal guarantees and had the ability to earn additional consideration based upon ARC’s post-closing performance.
ZS provided the necessary equity capital and arranged for bank financing to allow the Company to continue making acquisitions. In fact, over the ensuing 30 months, ZS helped ARC acquire 38 companies and grow its revenues from $75 million to $300 million. During that time period, management significantly improved the operating margins of the acquired companies and continued to grow the business internally.
ZS and the principals then structured a second recapitalization in which management received additional liquidity (greater than two times the original amount) without selling any of their equity, and ZS sold substantially all of its ownership interest to a new private equity firm chosen by management. Each of the recapitalizations were “win-win” situations from the perspective of both ZS and the principals.