Earlier last year I suggested that the acquisition activity through the imaging channel seemed a bit out of touch with the realities of the market.
My argument stems from the lack of diversification in products, services and their business structure. I questioned then and still question the logic in buying up a declining deliverable, a deliverable which continues to evaporate revenues and profits. Without a change in structure and product diversification, it seems many will soon realize what Ricoh discovered in 2017, and for some, there won't be anyone left to sell to if they realize this too late.
Some will argue that the multiples paid to the mega dealers by the new strategic acquirers are worth the risk. I would agree for those early to the party this will prove correct. I am sure DEX did just fine, and the next two or three mega dealers who bought their portfolio of dealers for 3-5 times earnings will also do well selling to Staples, Office Depot, or maybe BestBuy at 8-10 times earnings.
But soon the infrastructure changes and some will be left with massive debt in a declining deliverable where the value evaporated. It’s time to change the game.
See everyone at ITEX April 24th-25th Ray Stasieczko
