In conjunction with this month’s State of the Industry profile, we bring you a brief look at three variables surrounding transactional activity in our industry: the threat of a recession, handling a rebranding in the wake of a deal, and how experience can play a role in accelerating the integration process.
When you consider all the factors that can impact merger and acquisition activity in the document imaging industry, one variable stands out among the rest as it is the toughest to gauge and remains frustratingly beyond our control. The economy.
Annual GDP growth has been slogging along at a rate of 2 percent and below for much of the past five or six years, and with the U.S. economy a solid eight years removed from the last recession (albeit an abnormal game changer)—coupled with a presidential administration that can be objectively viewed as unpredictable and somewhat volatile—the odds of another recession happening within the next two or three years is historically favorable. We use the “historically” qualifier because there hasn’t been a recessional recovery period extending beyond 10 years since 1900.
While the economy can be as predictable as the weather, it stands to reason that it would, or should, factor into the decision-making process of dealerships that are considering selling their business.
Chip Miceli, DPOE
“According to all economic advisors, we are due for a recession,” observed Chip Miceli, president and owner of Des Plaines Office Equipment (DPOE), based in Elk Grove Village, IL. “If that’s the case, it’s going to be a hard road for a lot of companies.”
Miceli pointed out that while some businesses were strong enough to endure the 2007-2008 Great Recession, many customers within Illinois were not as fortunate and went under. The lasting impact can still be felt today, especially with companies that have a high concentration of their business invested in a small core of customers.
“We’re seeing a lot of consolidation in nonprofit organizations,” he said. “Smaller, industrial-type manufacturing companies are closing because they’re too small. Our country was built on smaller companies, and they’re being gobbled up because whoever they’re doing 90 percent of their business with want to own them. Or they lose that 90 percent of their business and they can’t stay alive.”
What’s In a Name?
Dan Doyle Jr., Dex Imaging
In the aftermath of an acquisition, one of the keys to facilitating smooth, uninterrupted service for both the acquired branch and its customer base centers around the brand and the possible renaming to reflect new ownership. For Dex Imaging, a $270 million dealership based in Tampa, FL, it’s a six-month process between closing and renaming.
“We send out letters to customers right away to let them know, then we’ll let them operate [under their current name] with the tag ‘A Dex Imaging Co.’ for a period of time as customers get used to the new billing,” said Dan Doyle Jr., president. “Then we kind of phase out [the old name]. Our IT group here has created its own conversion tools to convert data to our ERP system, which speeds up that process tremendously.”
Integration Enhancement
One company that enables its companies to maintain its identity is Visual Edge Technology of Canton, OH. The company has garnered a reputation for seeking out only high-performing businesses to acquire while leaving intact much of the autonomy that enabled the companies to become successful while providing tools for growth.
David Ramos, Visual Edge Technology
David Ramos, vice president of business planning and analysis, stressed that the company’s vetting process is thorough and has enabled it to avoid any 11th-hour collapses at the negotiating table. One perk stemming from Visual Edge Technology’s experience and success—it has obtained six companies since the end of 2015—is that it accelerates the integration process substantially.
“With every acquisition, there are learning lessons that allow you to increase velocity in integration post-acquisition and in the following acquisitions,” he said. “The velocity in which you integrate an acquisition today is probably half of what it was when we acquired our Kentucky subsidiary.”
