M&A Madness Takes Hold as Industry Lays Groundwork for Success
As we close the book on another eventful calendar year, we can’t help but marvel at the volume of M&A activity that continues to take place. Even as you read this, significant transactions continue to alter the industry’s landscape, and some of the major players have quietly revealed that they have major deals on the brink of completion. Any day now, the A&E network is bound to unveil a miniseries that follows some of the top consolidators as they shake hands on yet another transaction. Hey, we can dream, right?
Certainly, 2022 has been a crazy and unpredictable year, but we fought off the urge to wash, rinse and repeat all the talking points that dominated the past two-plus years (supply chain, inflation, Great Resignation). Why? Because just beneath the surface of the “same old, same old” sits a layer of unbridled optimism, borne of the opportunity spurred by every challenge. As this year’s top 10 stories will demonstrate, the industry remains unflinching and resilient in the face of business turmoil, determined to carve out a better future.
MARCO’S BILLION-DOLLAR BONANZA. Back in June, megadealer Marco invited industry press and analysts to its brand-new facility in Minnetonka, Minnesota, to show off many of the fantastic amenities it housed (including a stunning showroom and a game-filled space for employees). But the gathering’s true raison d’etre was CEO Doug Albregts’ announcement of an ambitious go-to-market strategy designed to transform the company into a billion-dollar dealer within five years—without the need to add a single new customer organically or through acquisition.
The quest seems particularly ambitious given that the company’s current revenue mark stands at $435 million. Part of the strategy involves leveraging actionable data to help identify opportunities within the current customer base while allowing its account executives to focus more on selling. Back in January, it launched a data intelligence group populated with professionals experienced in analyzing and interpreting the habits of customers. Using curated data gathered from PowerBI and Salesforce, the analytics can point sales reps in the most profitable direction and grow their share within the company’s 32,000 existing clients.
SUPPLY CHAIN STYMIES DELIVERIES. Take a look through this year’s Elite Dealer list and you’ll find endless testimonies accounting their greatest accomplishments prefaced with “Despite the supply chain struggles…” Unfortunately, the nation’s supply chain horrors continued throughout 2022 and promise to be a focal point at least through the first half of the new year. Many dealers profiled in the pages of ENX Magazine spoke of writing as much as $5 million in orders that they’ve been unable to fulfill because they can’t source hardware. Few manufacturers have been immune from a glut of backorders; in its third quarter earnings report, Xerox noted a $429 million product backlog.
The winners (if you can characterize them as such) in this saga are those dealers that have done a terrific job of managing their inventory. It’s also enhanced the value of (and search for) off-lease used and refurbished equipment. The ability to furnish clients with reconditioned loaners, in tandem with leasing agreements that can serve as a placeholder until orders are fulfilled, enabled dealers to make the best of a dismal situation. For the carriers of the Sharp line, however, the situation was not as dire…
SHARP-DRESSED DEALERS THRIVE. The inaugural “We’ve got inventory” award goes to Sharp Imaging and Information Company of America. During the company’s fall dealer roadshow tour, President and CEO Mike Marusic noted the addition of 20 net-new clients in the past two years. When factoring in the loss of roughly a dozen carriers to acquisition, it provides validation to the anecdotal accounts of dealers being turned on to Sharp for not only its extensive product portfolio, but also its ability to provide product.
Back in January, Sharp sent a note to dealers regarding the well-publicized global chip shortage that was having an impact on MFP production. An area of particular impact was the chipsets used in the wireless interface for Sharp workgroup models. The company’s engineering team was able to “implement circuit redesigns for some products and roadmap changes for others to minimize the impact on Sharp dealers and customers.” This and other challenge mitigation efforts led to a strong year for the manufacturer, profitability and a growing share of the market.
DEATHS IMPACT INDUSTRY LEADERSHIP. 2022 will almost certainly be remembered for the costly toll it took on industry leadership at both the dealer and manufacturer levels, as a number of corporate executives succumbed to illness. Just two days into the New Year, Al Scibetta, president and founder of Copier Fax Business Technologies in Buffalo, New York, died at the age of 72 following a brief illness. He founded the company as a Konica Minolta dealership in 1990 and grew it into one of the region’s most successful firms.
The industry was also stunned by the death of Xerox CEO John Visentin on June 28 following a brief illness. Despite serving only four years, Visentin made his mark as a brash and aggressive leader with visions of boundless growth, evidenced by his highly publicized campaign to acquire HP. He would later suspend the $35 billion hostile takeover bid at the onset of the pandemic, although Xerox is continuing his vision of digital transformation.
Michael Kidd, the president and CEO of U.S. Business Systems in Elkhart, Maryland, died July 5 due to complications from amyotrophic lateral sclerosis (ALS), also known as Lou Gehrig’s Disease. He had endured three separate bouts of cancer, and despite his ALS diagnosis and losing the ability to walk and talk, he continued serving the dealership until his final days.
On Aug. 24, Kazuo Inamori, founder and chairman emeritus of Kyocera, passed away due to natural causes. He founded Kyoto Ceramic Co., Ltd. (now Kyocera Corporation) in April of 1959 and served as company president and chairman until 1997.
SINGLE-USE CARTRIDGE BANS GAINING MOMENTUM. This past spring, the City of Los Angeles passed a resolution in support of legislation that would ban the sale of single-use, new-build printer cartridges due to their inability to be recycled or remanufactured. While it represented only one city’s efforts—and didn’t carry the weight of actual legislation—it’s another salvo fired in the larger, ongoing movement to eradicate single-use plastics, with states such as New Jersey banning plastic bags and straws.
However, this summer the effort found an even bigger champion in the form of the U.S. General Services Administration (GSA), the world’s largest consumer, which is moving closer and closer to no longer purchasing single-use plastics. Tricia Judge, executive director of the International Imaging Technology Council, has lobbied to ensure that ban includes printer cartridges, and has found support from Congressman Joe Morelle (D-NY) to that end and to stress the benefits of remanufactured cartridges. In fact, Morelle and 58 other members of Congress have written—separately or in concert—letters of support to the GSA for the proposed initiative.
ADDING CLARITY TO BRANDING. In recent years, there’s been a significant groundswell behind office technology dealers seeking to redefine themselves in light of the technologies they now offer to customers. Words such as imaging and printing, they feel, fall short of conveying the full breadth of products and services at their disposal. As the needs of the client continue to evolve, either organically or as a consequence of business conditions created by the pandemic, an increasing number of dealers seek to market themselves in a way that speaks to the modern office technology provider.
Earlier this year, LDI Color ToolBox of Jericho, New York, announced it was rebranding to LDI Connect, which the dealer felt more accurately defines the strategy, focus and future roadmap of the organization. Given that LDI’s portfolio has grown to include managed IT, professional audio/visual, document workflow, cloud communications and security since its 1999 inception, it wanted a name that could better connote more nuanced, complex solutions.
Applied Imaging followed suit this past summer when it was rechristened Applied Innovation. The Innovation aspect encompasses the technologies the Grand Rapids, Michigan-based dealer has been seeking to emphasize, such as its NetSmart IT brand, PrintSmart for MPS and ShredHub document destruction.
A complete branding facelift was enacted by Genesis Technologies of Northbrook, Illinois, which was rechristened genesisONE. The 31-year-old dealer felt the new name provided a better market approach in serving the needs of the growing hybrid workplace model. Also, Les Olson of Salt Lake City added IT to the end of its name.
CHANGING OF THE GUARD: Of all the leadership changes that occurred during 2022, perhaps none was bigger than Sam Errigo’s elevation to president and CEO of Konica Minolta. Errigo, who took the helm April 1 after Patrick Banno transitioned to senior corporate vice president at Konica Minolta Inc., is a 13-year veteran of the manufacturer. He’s charged with leading the firm at perhaps the most critical juncture in its history in light of significant supply chain issues for both hardware and toner. Errigo is also tasked with quarterbacking Konica Minolta’s digital transformation initiative.
On the dealer front, Lee Flood continued his swift ascension at Pearson-Kelly Technology, from sales manager in 2018 to executive vice president and now president of the Springfield, Missouri, firm. Ken Stinson took over as president of Usherwood Office Technology, becoming the first non-Usherwood family member to guide the company. And this summer, Ty Grigsby was named president of Boise, Idaho-based Fisher’s Technology. Ron Hulett became president and CEO of U.S. Business Systems in Elkhart, Indiana, following the passing of Michael Kidd.
ADDRESSING POST-PANDEMIC PRESSURES. While COVID-19 no longer plays an active role in the world’s collective conscience, its long-lasting impact continues to wreak havoc from a financial standpoint. Dealers may be grappling with ways to add bottom-line revenue, but they’re also highly cognizant of the struggles their client base is experiencing. One of the noteworthy trends of 2022 is the growing number of dealers that provide in-house leasing and financing options to customers.
There’s a segment of most dealers’ book of business that, for various reasons (including a lack of credit history), don’t qualify for financing from traditional leasing providers, which is especially true of first- and second-year businesses. By bringing the leases in-house, dealers can find more creative ways to provide the equipment clients need at terms that will allow them to grow.
M&A EXPRESS RUMBLES THROUGH INDUSTRY. The top industry consolidators were out in full force during 2022 as the overall clip of industry acquisitions continued its upward trajectory. While DEX Imaging, UBEO Business Services, Kelley Connect, Visual Edge IT, Flex Technology Group and RJ Young were busy racking up multiple deals, some lesser-knowns graced the M&A stage. This group was led by Doing Better Business, the pride of Altoona, Pennsylvania, which added three companies to its stable. We note that this list is hardly comprehensive, as some dealers choose not to share their acquisition news, but it does illustrate the ongoing strength of the M&A market as more and more companies seek to leverage partnerships with larger, stronger and more fortified organizations.
This year’s (possibly) undisputed M&A king is DEX Imaging, which racked up eight deals (Hendrix Business Systems, Imaging Concepts, Business Machine Products, BMC Office Technology, BizDoc, CopyNet, Meritech and Gulf Business Systems). Kelley Connect garnered five deals (Advanced Document Systems, Superior Office Systems, Michael Business Machines, OfficeTECH and Lee’s Office City). RJ Young picked up Ethos Technologies, Lewis Digital, Syndesi Solutions and Unitech. Doing Better Business obtained Canton Business Machines, Multiscope Document Solutions and Rocco & Strain. Applied Innovation reeled in Advanced Imaging Solutions, Sands Office Equipment Service and Mid-City Office Systems.
UBEO acquired Centric Business Systems and ADS Imaging Solutions. Novatech added ManagedPrint and Atlantic Business Systems. Flex Technology Group acquired Copy Link and Standard Office Systems. Doceo picked up Reliable Office Technologies and Business Machines Inc. Fisher’s Technology garnered Terrell’s Office Solutions and VLCM’s managed print services business. Prosource acquired VanDyke and PBSI Technology Solutions. Gordon Flesch Company obtained Stan’s LPS Midwest and Oshkosh Office Systems.
Visual Edge IT obtained Slash Point Sales and Service, while EO Johnson picked up ShelDon Business Solutions. GoodSuite acquired Strata IT, and Advanced Office added CopyCare Document Solutions. Access Systems purchased J&S Electronic Business Systems, and Offix tabbed Masterfax and Copier Source. Eakes Office Solutions acquired OfficeNet Inc., and Frontier Business Products added Metro Copier Services. Donnellon McCarthy Enterprises nabbed Dollet Managed Services, and Systel Business Equipment acquired the customer base of Office Copying Systems. Americom Imaging Systems added DMC2, and ACM Technologies obtained Royal Imaging International. The Network Pro acquired Nextrio, and Smart Office Automation obtained Advanced Copier Technology. Imagetec L.P. acquired ITsavvy’s MPS group, and ACT Group merged with BDS. EDGE Business Systems added North Georgia Business Machines.
OEM BLOCKBUSTERS: Big deals weren’t relegated to the office dealer space. There were 9- and 10-figure jaw droppers among the industry’s manufacturers, software specialists and other providers. The biggest saw Kaseya plunk down $6.2 billion for Datto. HP wrote a $3.3 billion check for communications specialist Poly. Ricoh’s parent invested $625 million in obtaining Fujitsu’s scanner business.
ARLINGTON was busy adding International Toner Company, Supplies Wholesalers, Cartridge World USA and Warehouse International. Other deals saw Valsoft Corp. scoop up MPS Monitor and Euroform A/S. Xerox tabbed Powerland, a Canadian IT service provider, and Clover Imaging Group obtained Phoenix Direct. ConnectWise acquired Wise-Sync and Keypoint Intelligence added Karstedt Partners.
