In a bid to reach the East Coast, a fast-growing technology services provider from Minnesota has acquired Central Pennsylvania's top office-equipment dealer.
St. Cloud-based Marco said Tuesday it has purchased Phillips Office Solutions, based in Lower Swatara Township, for an undisclosed sum. The deal closed on Monday.
"This is the next phase of our national expansion," Marco CEO Jeff Gau told the Business Journal on Tuesday.
Marco, founded in 1973 as a small typewriter company before expanding throughout the Upper Midwest, has 61 offices and expects to do more than $400 million in revenue this year. Phillips Office Solutions, Marco's largest acquisition to date, will do about $38 million this year.
The plan is for Phillips to serve as the East Coast hub for Marco, Gau said. Marco is retaining the entire Phillips workforce — 140 people — and promoting Phillips President Bill Shuey to regional president of copier and ECM solutions. ECM stands for enterprise content management.
The co-owners of Phillips Office Solutions, brothers David and Peter Phillips, are planning to retire, said Peter Phillips, the company's president and CEO.
The brothers began exploring their options in May and said they hoped to make a deal work with Marco, a company and leadership team they have known for decades because of similar relationships with office-equipment and furniture manufacturers.
Marco, which is owned by a Minnesota-based investment firm, has been growing rapidly for more than a decade. The company has made 10 other acquisitions over the past two years and more than 40 since 2005, pushing its employee count to nearly 1,400.
Phillips said Marco made a "very competitive offer" and the brothers felt the deal was the right move for Phillips, which has 10 offices in Pennsylvania and Maryland.
Under the deal, the business will operate as Phillips Office Solutions for the next 60 to 90 days. After that, it will be called Marco.
Gau said Marco intends to remain a strategic buyer in the document management industry and will use the Phillips deal as a springboard for future East Coast acquisitions.
"We will expand out there through Phillips," he said. "Acquisitions are part of our strategy."
Two years ago, Phillips acquired two companies in an effort to expand its document management business. The company bought North Central Digital Systems in Montour County. And at the beginning of 2016, the company acquired Phillips Supply House in Lycoming County.
Ahead of the Marco deal, the Phillips family sold off their Phillips Workplace Interiors division to senior management. The Phillips name will remain on that company as the new owners look to expand to a new facility. Phillips Workplace Interiors specializes in the corporate, education and health care markets.
The furniture company's future move out of the Fulling Mill Road facility, which is owned by the Phillips family, will free up space for Marco to add employees. Shuey said a big focus will be expanding the IT services side of the business.
Over the years, Marco has become an IT services company that also sells copiers and printers, while Phillips has traditionally focused on the office supplies and equipment business. IT services account for about 5 percent of the revenue at Phillips.
"This is a mature industry and the growth potential is in the IT services," said Gau, who expects opportunities in Central Pennsylvania to cross-sell those services to office equipment and supply clients.
Those services will include managed IT services, hosted voice and Microsoft Suite offerings, among other additions.
"I'm excited about the future," said Shuey, who started with Phillips out of college 27 years ago. "We'll wear a new jersey, but we're still taking care of our customers. But we'll have more resources to do that."