Updated: Jan 15, 2020
Over nearly the past decade the abundance of cheap money and the proliferation of investors in private equity and venture capital looking to find investments for the growing endowments has led to consolidation in nearly every industry.
December 13th, 2019
By Williama DeMuth email@example.com
In the heyday of our industry, dealers and imaging suppliers of all shapes and sizes could survive and thrive. As with any maturing industry, competition and margin erosion and eventually consolidation was inevitable, perhaps even healthy. The toner industry consolidation started around 2005. With Clover’s acquisition of MSE in 2014 and the demise of LMI, it’s unclear whether there is a chance for another major player to compete with Clover or whether Clover can continue to dominate that market.
Parts remanufacturers/distributors consolidating with toner remanufacturers began in 2009 and we’ve seen the mixed results that combining these two sister operations has produced.
It is harder to pinpoint exactly when the dealer consolidation began, but the speed to which it has taken off in the past few years has been staggering to watch. The rise of the superdealer is a real thing, as is the demise of the mom-and-pop break-fix repair shop.
And now we are starting to see the channel integrate.
In 2017, Office Depot acquired Compucom and more recently, we saw Staples make a surprise entry into the dealer market. But the biggest shockwave was yet to come.
2019 ended with a bang with one of the biggest stories of the year. While the news caught all the buzz, we could have witnessed the next iteration of business strategies in the imaging channel. NEP, the private equity company behind the country’s largest mega-dealer, Marco, acquired Clover Imaging Group. This acquisition brings together a formidable team of parts & printer remanufacturing, field service and toner remanufacturing under one roof for all intents and purposes.
The imaging industry isn’t as neat and organized as the structure you would find in the automotive parts industry but essentially it is as follows:
Next to labor, toner and parts are the costliest expenses to a service operation. With the stroke of a pen, they have redefined their business in one acquisition giving Marco a tremendous competitive advantage.
Vertical Integration for Dummies (Written by a Self-Proclaimed Dummy)
Vertical Integration is a business strategy whereby a company purchases its suppliers and/or distributors, to control the supply chain. The goal of vertical integration is to give the company a competitive edge over non-integrated companies. End users are conceptually more likely to choose the integrated firm's products or services. Ideally, the costs are lower, the quality is better, or the product is tailored directly to them.
There are volumes written about vertical integration both pro and con. The general consensus is the following;
Historical Advantages of Vertical Integration
Avoid Supply Disruption
Increased Market Control
Creates Economies of Scale
Historical Disadvantages of Vertical Integration
More Rigid to Trends