Many of the major M&A players in the office technology space would relish the opportunity to sneak a gander at the strategy of Visual Edge Technology, one of the industry’s leading holding company models. The privately held, Canton, Ohio-based roll-up specialist has annexed six high-performing businesses since the end of 2015 and shows no signs of slowing down.
Michael Brigner,
SVP Business Development
Since December of 2015, Visual Edge Technology has obtained a number of companies: WBS Technologies of Miami, California-based Image Source, Axion Business Technologies of Greater Boston, Premier Business Products of Detroit, Houston-based TLC Office Systems and, most recently, Netwise Resources of Indianapolis. Prior to that, the holding company facilitated the acquisition of Lexington-based LEXNET by one of its subsidiaries, Commonwealth Technology.
Visual Edge Technology decided to enter the office solutions industry in 2004 as a company in the portfolio of New Enterprise Associates, out of Palo Alto, California. The strategic decision was made to set a course as one of the largest resellers in the office solutions industry, including managed print and IT services. Its collective of 11 core companies, with multiple branches, boasts sales in the hundreds of millions (Visual Edge Technology does not disclose actual sales volume).
David Ramos,
VP Business Planning and Analysis
ENX Magazine spoke with Michael Brigner, senior vice president, and David Ramos, the recently-added vice president of business planning, to discover why healthy and successful dealerships are choosing to align with Visual Edge Technology’s strategy.
What does Visual Edge Technology pride itself on?
Brigner: Our vision is to grow profitably through internal expansion as well as acquisitions. Our operating companies do that by demonstrating leadership and excellent performance in sales, marketing and service of the general imaging solutions business, as well as being heavily focused on the managed services provider business. If you look at our mission, it’s to supply innovative solutions and technology services that continually increase our customers’ productivity. We also continue to provide our employees with outstanding opportunities for their careers within our company.
What do you look for in an acquisition?
Ramos: As we look to build out our national footprint, geography is one facet that we’re seeking. Secondly, we look at the market from the perspective of print volume and where it is coming from within each of those geographies. We also look at brand mix relative to which manufacturers we enter into relationships with. Finally, an important factor to our strategy is that we look for highly profitable companies. We are not in the business of buying distressed assets.
Brigner: Another factor we look for is experienced, committed management teams. Our expectations, as well as that of our investors, is that the owners will remain in place for a period of time following the acquisition.
Why would a company join Visual Edge when it’s already profitable?
Brigner: The owners may be at a point where they want to take a large risk off the table so that they can diversify their risk instead of it being 100 percent in their bailiwick. They could reach a point where they want to be part of a larger group that provides access to capital so they can acquire larger companies, which they may not want to do on their own balance sheet. Although we look for owners to stay on, there is succession planning we can do with them over a short period of years, so they can work their way out of the business and at the same time take a large amount of cash off the table from a risk-diversity standpoint.
How many prospective companies do you look at in a given year?
Ramos: There are close to 2,300 independent office equipment dealers in the US., from $100M plus in revenue down to sub-$10 million companies. We look at all of them. The selection process we go through encompasses who they are, what they do, their revenue, what brands they carry and how many employees they have. We look at everything from an analysis perspective. In addition to independent office equipment dealers, we also do extensive analysis into IT resellers, IT VARs, and managed service providers, because that’s a big component to our focus going forward with our growth strategy. We are looking at the top 100 markets in the US relative to their overall traditional print potential and the subset of managed print services, as well as managed services.
Why is your vetting process so successful?
Ramos: We focus considerably on the bottom line. We also look at the historical track record of producing to that bottom line. It’s not a big secret in the industry as to who the most successful companies are. It’s a pretty small community, even though the companies number in the thousands. It’s not hard to tell who is successful and who is not.
Brigner: It goes back to a variety of variables, whether it’s the geographic area, the market positioning of companies, vendor and customer relationships, the experience and commitment of the management team, the reputation the group has within the community, and what their financials reflect, as well as their growth potential. All of those items can go into our vetting process. What I’m looking for when I talk to folks is not companies to join our strategy, but outstanding people and talent. That is what is really important—the owners, the people they have, and their dedication to building their business into that quality marquee it has become in their community.
Earlier this year, Visual Edge acquired Houston-based TLC Office Systems and Netwise Resources of Indianapolis. What made these companies an ideal fit for your portfolio?
Brigner: The geographic locations were excellent. When you look at the Business Process Improvement, they had excellent vendor relations. They were very profitable, well-run companies with outstandingly committed management teams. They had excellent reputations and reflected the growth in their marketplaces over the years. They were representing outstanding vendors, and they had high-quality service departments, which we saw reflected in the community when we visited with their customer base. Some folks would think this is a very sophisticated, challenging business, but it’s very simple to determine whether companies are high quality.
What is the value proposition that Visual Edge offers its dealerships?
Ramos: The top thing would be this: do they share the vision of what our strategy is in the short and long term? There’s a legacy component that is important to the companies we acquire. We do not change their marquee, do not disrupt their employees, do not change the makeup of the company. That’s very important to us. We don’t change how you go to market, how you sell, or what you sell from a brand perspective. These are principles the company worked hard to build. They have longstanding relationships with their employees and customers—that’s very important to them. We want that to continue. We make sure we create zero disruptions to the customer. I think that makes us an attractive option.
Do your dealerships engage in cross-selling in order to provide a more comprehensive product and service portfolio?
Ramos: The presidents of the subsidiaries have the option and the access to do that, but it’s up to each president of each subsidiary. It’s pretty compelling that you have those options, but we don’t dictate that to them.
What was your biggest challenge in the past year?
Brigner: At my level, finding enough time to talk with all of the companies that asked us to come and review the mutual opportunity that could exist between us. That is one reason, among others, we have asked David to join us. The companies at the operating/geographic level all continue to be challenged to grow their local business organically and making good decisions to expand options to their customer base. I think that challenge remains all the time, regardless of what is going on economically.
With the continued shrinkage of the office technology dealer space, how is Visual Edge gaining an advantage against other dealer roll-up models?
Ramos: If you’re someone who spent 30-40 years building your business and you have longstanding relationships with employees and customers, that legacy factor is something that gives us a competitive advantage. We still allow you to run your business the same way you did the last 30-40 years.
Brigner: We make a concerted effort to look for excellent, high-quality owners and executives of companies that have strong employees and exhibit years of being well-run and want to continue that way. By joining our strategy, they gain several very important opportunities as owners. These are discussed under NDA when we visit with them.
How do you view the industry changing in the future and what are you doing to adapt?
Ramos: The legacy core components to our business, which are traditional office equipment, parts, supplies, break/fix, labor—those components, along with a trend in print overall, which is a mature market, are going to remain steady for the next five years. You’re not going to see a lot of volatility, barring any global calamities relative to the economy or global conflict. With print, we’re confident that the core legacies to our business and industry will remain steady.
That being said, we need to change. We need to embrace diversification. It can be production print, and that’s a close, adjacent market to where I am in segments one through four. That’s possibly an area where we can make an investment and focus on production, because there’s ample opportunity for growth. It could be managed print services. If MPS is not 10 percent of your business, maybe that’s your first goal from a diversification standpoint. There’s some healthy growth data relative to forecasts for the SMB space for managed print. Getting into true managed services is a phenomenal opportunity. It’s a much bigger space than traditional office equipment, parts, and consumables.
What are your goals for 2017 and beyond?
Brigner: The short and long view is to continue to identify high-quality office solutions companies and managed services provider companies to join our strategy and continue to build upon our strategy.
