Talent Acquisition Critical to Konica Minolta’s M&A Strategy A Conversation with Sam Errigo

The hunger to expand a dealership’s market footprint through merger and acquisition is not relegated to just dealer roll-up initiatives or private equity models. Original equipment manufacturers (OEMs) have exhibited a voracious appetite to expand by targeting independent dealerships in order to grow their geographic market footprint, while in some cases eliminating competitive alternatives.

As OEMs wage war to grow their market share, they face the same challenges as that of dealership roll-ups in how they go to market in their M&A approach and differentiate themselves in the manner most enticing to prospective sellers. One OEM that has a multifaceted approach to their market expansion is Konica Minolta Business Solutions U.S.A. (Konica Minolta), which has ramped up its activities significantly in the past eight years.

M&A Strategy

Sam Errigo, Konica Minolta

Konica Minolta has historically focused its M&A energies in three areas: Managed IT Services, Enterprise Content Management (ECM)/Document Management, and the BTA channel. Since 2010, when it first embarked on adding Managed IT Services with the acquisition of All Covered, Konica Minolta has acquired more than 20 such providers, according to Sam Errigo, executive vice president of sales and business development. While Konica Minolta was drawing up its business strategy, IT Services was poised to be a critical strategic growth component that enabled the transformation from connected MFP devices to full integration across the entire enterprise.

“From a synergistic standpoint, we knew there were close adjacencies in Managed IT Services to support and provide incremental value to our core business,” Errigo said. “We’ve branched out vertically to create practices in Managed IT Services for financial, health care, legal, and education, as our customers demand experts to advise them on the latest technology. Our Managed IT business model coupled with a diverse portfolio of services, allows us to support a wide range of customers, ranging from SMB all the way up to enterprise accounts. Our service offerings span hosted cloud, staff augmentation, managed service helpdesk support, project and application development, IT strategy and assessment, and security services. Managed IT Services will continue to be a big focus to activate our Workplace of the Future vision and expand our value to the customers we serve.”

ECM/Document Management companies have been targets for acquisition over the last three-plus years at Konica Minolta. Particular areas of focus are organizations with SharePoint development expertise, and Hyland Software professional to support enterprise customers and integration skills for Document Management products like Square 9 and Prism to support the SMB space. “Core to our acquisition strategy for Managed IT and ECM is to acquire and retain top talent to help accelerate profitable revenue growth while delivering an exceptional customer experience,” Errigo added.

Managed IT Services will continue to be a big focus to activate our Workplace of the Future vision and expand our value to the customers we serve.

Thorough Vetting

Konica Minolta takes a methodical approach to its vetting process. Companies that pass the initial financials due diligence are interviewed in person to get a better understanding of the company, its ownership, goals, expectations regarding the acquisition and ultimate objectives (for example, whether the owners are planning to stay or exit the company).

“Our business model has worked really well because we do the due diligence around the most critical elements, which are people and culture,” Errigo said. “If you get that right from the beginning, the business will continue to grow and foster. If it’s not done correctly, the business will almost assuredly disappear.”

Determining Prospect Value

Konica Minolta uses a number of formulas to determine a prospect’s value, including a discounted cash flow model, with adjusted EBITDA, and revenue makeup factored into the equation. The company evaluates upwards of 50 Managed IT companies in a year, and Errigo estimated that 1 in 10 prospects are a fit for their model. The due diligence team pre-qualifies potential acquisitions to ensure the business model and key areas of business growth are consistent with Konica Minolta’s growth and service delivery strategies.

“We’re at a point where we’ve acquired some of the best managed providers in the U.S., and now we’re doing tuck-ins or strategic acquisitions that are expanding our services and vertical market capabilities,” Errigo noted. “We are still expanding our ECM business to achieve critical mass to support the growing need in Content Management. Our activity in this space is high to sync with our growth objectives.”

Companies that have developed a niche product are enticing, as are resellers with a strong employee roster where Konica Minolta can add talent and bring new products and services to market, which it has done in both the managed IT and ECM spaces with SharePoint capabilities and development, and custom coding. “We look at what makes sense based on customer demand and our ability to scale the product or service on a national basis. This is a key component to drive proficiency and profit,” Errigo said. “SharePoint development has been an absolute home run for us, as we are staffed to support long- and short-term projects on a national basis.”

The ongoing pursuit of investments in new technologies, coupled with acquisitions, are the cornerstone of Konica Minolta’s transformative strategy, which includes becoming more of a services-led organization. Errigo cautioned that finding acquisitions that best match your company’s strategy, regardless of how long it takes, is a critical element of success.

Acquiring for fast growth, coupled with a lack of strategic planning for business integration, will assuredly result in disappointment for both parties. “The key to our success is multifaceted, starting with our due diligence process, but ultimately we have honed our integration process to onboard our newly acquired companies in an efficient manner without disrupting business operations,” Errigo said.

“The next 18-24 months are going to be very telling for the industry,” he added. “Technology is moving at an unbelievable rate and our customers expect us to keep pace to provide the most advanced technologies that deliver exponential benefit. In order to execute and align with a transformational strategy, an investment in human capital with technology experience is an absolute necessity. With the acceleration of IoT and mobile technology, the workplace landscape is changing quickly. Organizations that can respond to the demand will be the ultimate winners.

Talking Points

“When engaging with customers our conversations are not about multifunctional products or CPC, the conversation revolves around data security, cloud enablement, mobility and the management of information. These issues are top of mind for most business executives. Connecting a device on the customers’ network is one thing, but how it is secured, how you are integrating the workflow, and how you provide a cohesive ecosystem for that customer and deliver an unbelievable user experience will be paramount.”

Konica Minolta’s Workplace of the Future vision includes integrating Managed IT Services, Managed Content Services, cloud-based application support, conference room management, mobile technology, security and Managed Print Services—the entire Internet of Things landscape—that will require a single provider to guide the convergence of this technology.

“Organizations in the office equipment space that have invested in talent acquisition, acquired companies to expand their customer reach and have built a foundation to support the next generation of customer demand, I believe, will survive,” Errigo said. “Those who are clinging to hardware and maintenance annuities are going to be commoditized. That’s where you’ll see much more aggressiveness with mega dealers or OEMs buying up the base. Konica Minolta will continue to acquire in that BTA channel because we are bullish on the market and believe the investment we made can be leveraged across a broader set of customers. Dealers that are evaluating selling see a real opportunity for their employees and customers to grow due to our ability to deliver expanded technologies, services, resources and support all backed by infrastructure to absorb the ever changing market demands.

With the acceleration of IoT and mobile technology, the workplace landscape is changing quickly. Organizations that can respond to the demand will be the ultimate winners.

Survival of the Fittest

“The continued operation of business will be contingent upon the ability to differentiate the product or service offering, inclusive of talent makeup, coupled with the monetization of the offering-customer value. With the rapid acceleration of technology and the increasing demand for value-added technology providers, many existing businesses will need to make significant investments to keep pace or divest. The M&A path may allow for a quicker ramp if done correctly and also deliver the differentiation in the marketplace to bolster growth.”

Erik Cagle
About the Author
Erik Cagle is the editorial director of ENX Magazine. He is an author, writer and editor who spent 18 years covering the commercial printing industry.