Chip Crunk
Last week’s announcement that RJ Young Company, based in Nashville, Tennessee, had acquired multiple Ricoh direct branches (Huntsville, AL; and Columbus, Tupelo, and Gulfport, MS) represented a huge win for the independent dealer channel, a channel that has long been a slow-moving target for manufacturers looking to bolster their direct channel business. This news takes everything we’ve seen to date on the acquisitions front and twists it around like a pretzel. Imagine an independent dealer acquiring manufacturer’s direct branches? It’s as if we’ve just landed in Bizarro World. (If that reference is too esoteric for you, go to http://en.wikipedia.org/wiki/Bizarro_World for a primer in comic book lore.)
Anyway, this week we had an opportunity to speak with RJ Young President and CEO Chip Crunk about the acquisition, what it means to the dealership, and whether or not we should brace ourselves for a new trend of independent dealers acquiring manufacturer’s direct branches.
This is exciting news, were you surprised that you were able to make this deal?
Crunk: I was kind of surprised that it finally came to fruition; it was something we were working on for about four years now.
Did you approach Ricoh or did they approach you?
Crunk: I approached [Ricoh’s] Kirk Yoshida before he went back to Japan. We were just about to make it happen and then the IKON acquisition was announced. Everything had stopped and we didn’t really know why until that was announced. Then when Kirk came back to the U.S. [to oversee] Ricoh again all of a sudden we had it going again. It’s just been a long, long, process. They are very slow to make changes.
Why were these locations a good fit for RJ Young?
Crunk: They’re all locations where we already have offices in today. We kind of went from a second and third-tier vendor and are now a dominant player in all of those markets.
What do you see will be the most immediate impact to RJ Young from these acquisitions?
Crunk: We have a huge base now and our profitability can be cut in half by what it takes us to do a buy back on an acquisition in a market we’re already in. We think we can continue to grow that market with one less competitor in that market where we have an exclusive with pretty much all the Ricoh products in that market.
Will you be managing them any differently than they were being managed by Ricoh?
Crunk: The big difference is our sales reps income is based on profitability which is a little bit different than the way they do it where it’s based on revenue. Our objective is to be involved with the communities in those marketplaces and do what we can to continue to grow in those markets.
What was the reaction of your employees to the news, did they see this coming?
Crunk: It came as a big announcement. We do one to two acquisitions a year and it creates a buzz around the office every time we do one. This had additional impact because it’s my understanding that this is the first time a dealer has done a major acquisition from a direct channel of the manufacturer. This had a much bigger impact than other acquisitions.
You’ve made other acquisitions in the past, do you have that down to a science now and have you figured out all the pitfalls to avoid when bringing a new organization into the RJ Young fold?
Crunk: I’m not sure I figured out every pitfall, there’s always something new that can come up. We have a very good process after doing a few of these. The first ones didn’t go so smooth and now we have a team that handles the transition and it goes relatively smooth.
What’s the most important thing you’ve learned from previous acquisitions that have helped you when making other acquisitions such as this one?
Crunk: The key thing on the front end is to communicate—to over communicate, not just with the employees, but the customers. We talk about what our vision is and how we’re going to run things. It’s also important to make sure that we tell everyone on the front end, especially the employees, that there are going to be changes. Our objective is to grow this market, we’re not going to be happy just doing what’s been done the last few years. This is a growth opportunity for us and our expectations are probably going to be a little higher than what you’re used to.
Is this type of acquisition any different than acquiring an independent dealership?
Crunk: The difference is you’ve got a manufacturer that is very involved in making sure this is successful because their success is dependent on us being successful. Normally once an acquisition is done the dealer owner is out of the picture and it’s not their problem anymore. Here Ricoh is very much involved and wants this to be a win-win situation.
Do you expect to make similar acquisitions in the future?
Crunk: I think there are a lot of opportunities right now. There are a lot of dealers struggling. I think there are a lot of manufacturers that are struggling, especially in these secondary markets. I think this is the first shot over the bow. If this is a success like we think we can make it a success I think you’re going to see this be a more active trend in this industry.
Do you think other independent dealers are going to see what you’ve done in buying manufacturer’s direct branches and start looking into those kinds of opportunities themselves?
Crunk: I think the dealers are already bombarding Ricoh trying to do the exact same thing in other markets. I don’t think Ricoh is going to do additional ones [right now]. Manufacturers have resisted that in the past. This is their first entry into this and they want to see how this is going to work. If this becomes a success with us I think you’re going to see them carry this forward. I think the industry is in a transition where in the future the distribution model is going to be large independents and the direct operations. I think Ricoh and the others are going to want to align themselves with the top independent dealers in the secondary markets because they cannot be successful in those markets.