The days of DANKA and IKON may be long gone, those heady times when billion-dollar deals captivated the office technology dealer space. There are far fewer players, and dwindling print demand forced a correction, a right-sizing of the market.
If someone were to tell Dan Doyle Jr. that the current M&A environment is “not his father’s industry,” a smile might cross his face, since Dan Sr. was an M&A player in the previous generation. The 1990s may be long gone, but the father-son tandem behind DEX Imaging of Tampa, Florida, has positioned itself to become the industry’s preeminent roll-up. The Doyles see a need in the office tech dealer universe, and following last week’s announced buyback from Staples—in concert with new private equity partner Gamut Capital—one thing is clear. The roll-up strategy is in place.
In this week’s edition of Two-Minute Drill, Dan Doyle Jr. discusses the rationale behind parting with Staples (which acquired DEX in 2019) and the opportunities he sees in the market.
Why did you decide to repurchase an interest in DEX Imaging?
Doyle Jr.: We thought it was timing. We were looking at the industry as a whole. You’re seeing some of the OEMs partner up with each other from a manufacturing standpoint. So we’re see a little bit of a roll-up there, and the dealer industry is ripe for that. However, it’s a different type of roll-up than it was back in the `80s and `90s, when DANKA and IKON were doing it. There are some great regional players out there, what I guess you might call mega dealers. But the [M&A market] was kind of stagnant. And so we decided it was time to make the move.
How does this deal position DEX for the future?
Doyle Jr.: We approached Staples with our roll-up idea, but they weren’t in a position that would allow us to do it. They’ve been a great partner, but they couldn’t allow us to do the bigger roll-ups. So we went out and found a partner that shared our vision and beliefs. And so when we went to market to put this together, it was with the idea of doing a roll-up. So we have everything in place.
I’m not going to say Staples tamped us down, but we weren’t as aggressive [with acquisitions under Staples] as dad and I would have been. I think our new partner will be more aggressive as well. We took a large stake of ownership and now we’re going to push that approach. We’ve got to be one of the bigger players and fill the void that that’s out there.
Obviously, there are many private equity options. What attracted you to Gamut Capital?
Doyle Jr: If you look at some of their investments, they have some tech [in their portfolio] and some core baseline businesses. In our industry, we’re kind of both; we are selling some technology, but at the end of the day, we’re a service organization. That’s kind of an old school business, and Gamut believes in both [technology and service]. So they were a great fit. We talked to a lot of different private equity firms to get a feel for their approach. Obviously, they’re interviewing us as much as we’re interviewing them. We narrowed it down to the final three and laid out our vision. And it was Gamut that really pounced on it.
How do you see this roll-up strategy playing out in the coming months and years?
Doyle Jr.: We’re in an industry that gets negative press because of the decline in printing. But we’ve done a serious dive into our customer base, and they embrace printing. People are back in the office and printing again, and we’ve seen a nice uptick. Printing is not really disappearing, it’s just the way the customer is printing and where they’re printing that’s evolved.
But you can’t just be a copier company or an MPS provider. You’ve got to be in all of the segments in order to capture office prints. Someone like Xerox will say that print’s down, and I probably would agree with them in regards to their major account customers, especially in the large cities. Those markets haven’t recovered, post-COVID, to what they once were. In the other markets, especially for the regional players, they’re back in the office. We’re seeing a need for technology and lower costs—we provide that as well. So we think that the business is ripe, but it’s changing. You can’t be asleep at the wheel. You can’t be the dinosaur and just think it’s going to be done the way it was back in the 60s, 70s and 80s. People operate differently today than they did just three years ago.
