Konica Minolta Acquisition of Muratec Signals Deeper Investments in Industrial Printing

At first glance, Konica Minolta Business Solutions U.S.A. Inc.’s acquisition of Muratec America appears to be motivated by the companies’ longstanding OEM relationship and complementary office technology businesses. Konica Minolta gains B&W A4 engine technology, an installed base, channel, and the well-regarded Muratec team. Yet the purchase won’t have that large of an impact on Konica Minolta’s office printing business, and the competitive landscape probably won’t change that dramatically either.

So while office certainly played a role in last week’s acquisition, the primary motivating factor for this acquisition was more likely Konica Minolta’s strategic goal of growing its industrial printing business. Industrial labeling is a major piece of this strategic effort and a key near-term revenue driver, with the technology now headlining dealer meetings and other company events. Muratec brings the company a range of labeling and finishing systems, along with an experienced and knowledgeable team. Together, these should enhance Konica Minolta’s existing portfolio of homegrown and MGI systems and ultimately contribute to its growth in labeling.

OEM History, and Office Portfolio and Channel Strategy

In its Aug. 1 announcement Konica Minolta identified a “mutual and complementary product lineup with Muratec,” referring to the two companies’ lack of portfolio overlap. Each brand will fill gaps in the other’s lineup. Konica Minolta and Muratec have a longstanding, reciprocal engine OEM business relationship, both in the US and Japan. Konica Minolta has for several years relied on Muratec A4 B&W engine technology to fill gaps in its lineup (e.g. bizhub 25e), while Muratec has licensed a growing range of Konica Minolta A3 engines, and—more recently—A4 color engines (1/2017), to supplement its limited homegrown office lineup. Konica Minolta even has an estimated 19 percent stake in Muratec’s Japanese sales company (as of 2013), further illustrating the deep working relationship between the companies.

While Muratec’s A4 B&W MFP technology is certainly an asset to Konica Minolta, it is important to note that Muratec America’s engines are currently limited both in range (25ppm – 37ppm) and diversity (only 2 speeds). So, while this acquisition certainly gives Konica Minolta new technology assets, the manufacturer will still require non-Muratec engines (e.g. Lexmark), homegrown engines, or a combination, to achieve a complete A4 B&W portfolio.

Konica Minolta A4 Engine Suppliers (# SKUs)

In the near term, expect Konica Minolta to leverage Muratec’s A4 B&W technology to fill its low-end lineup (e.g. the 25ppm bizhub 25e), while otherwise continuing to utilize Lexmark A4 B&W engines at the mid- and high-end of its lineup (e.g. the 35ppm bizhub 3320, 42ppm bizhub 4020/4050, and 50ppm bizhub 4750).

In terms of channel, Konica Minolta has signaled that it is not seeking significant channel expansion, and therefore the company should be expected to focus on capturing larger Muratec dealers in the coming months, with smaller Muratec dealerships possibly converting to other brands in the longer term. There are a number of dual-line KM/Muratec dealers in the US, suggesting that Konica Minolta has an opportunity to strengthen its presence in these accounts (e.g. All Copy Products, Impact Networking, P.O.A., or PERRY proTECH).

Role in Konica Minolta M&A Strategy & Industrial Printing

Konica Minolta disclosed that it has completed 30 acquisitions in the past five years, positioning it as one of the most active manufacturers inside or outside of the print industry in terms of mergers and acquisitions. In recent years, their M&A and investment strategy has largely targeted managed IT services, ECM, health care, various optical technologies, and workplace technologies, while printing investments have typically centered on production areas (e.g. MGI, Charterhouse, Ergo Asia, etc.). This M&A history, along with the various characteristics of this specific deal, again suggests that it was Muratec’s industrial label press business that was the primary motivation for the purchase and now offers the most potential strategic value to Konica Minolta long term.

Industrial printing (labels, KM-1, MGI, etc.) is one of the most strategically important and rapidly-evolving areas of Konica Minolta’s business. The company identifies industrial printing, including label printers, textiles, and packaging, as a massive ¥52 trillion (approximately $469.5 billion) addressable market with a low 3 percent digitization ratio, which the company views as a significant analog-to-digital conversion opportunity. In addition, Konica Minolta identifies industrial printing as one of its strongest near-term revenue drivers among its growth business segments (which include medical IT, marketing services, and others), suggesting that the company is directing considerable strategic resources toward this area.

Muratec immediately brings a notable range of label presses to Konica Minolta’s industrial printing lineup, including at least four inkjet digital label presses, two toner-based digital label presses, and four digital finishing systems. These systems will add to the company’s existing range of label systems, including the bizhub PRESS C71cf, as well as a number of MGI systems that have expanded their presence in the past few years and played a major role in Konica Minolta 2016 US dealer meeting.

Strategic Cornerstone

The acquisition of Muratec America also serves as the latest evidence of the intensifying consolidation in the print industry. The acquisition follows shortly after the Chinese consortium purchase of Lexmark’s print business and HP’s decision to buy Samsung Printing Solutions, in addition to a much wider range of manufacturer-led purchases of service/solutions providers and the near weekly pace of channel acquisitions in western markets.

Muratec’s decision to be acquired by Konica Minolta also calls attention to the more precarious position that lower-tier brands face in a mature and consolidating industry. With Muratec’s small market share and relative scale, limited units and revenue, and channel and geographic presence (mainly the US and Japan), the company likely viewed an acquisition as a necessary exit strategy. In addition, Muratec’s parent Murata Machinery does not view print (and therefore Muratec) as a significant strategic component of its business. Now owned by Konica Minolta, but operating as a subsidiary, Muratec gains a significantly stronger position under one of the industry’s strongest and financially healthiest brands. And this subsidiary ownership structure, combined with Muratec’s relatively lean workforce and small lineup, also likely presents a more flexible timeline for the larger company to successfully integrate the new acquisition.

Competitive Impact

The competitive impact of Konica Minolta’s acquisition of Muratec’s office portfolio will be relatively limited, given that the two companies already have a longstanding OEM partnership and shared many dealer accounts as complementary brands. The acquisition could certainly provide Konica Minolta with new channel opportunities with Muratec dealerships that Konica Minolta deems large enough to add to its authorized dealer channel. In the longer term, it is possible they could leverage Muratec’s technology assets to develop a wider range of A4 engines, which could eventually displace Lexmark as Konica Minolta’s primary A4 B&W engine source, as well as positioning Konica Minolta as an even stronger single-line brand.

The purchase of Muratec also certainly has competitive implications in the industrial label press space, as Konica Minolta expands its own inkjet- and toner-based press portfolio, as well as its label finishing lineup. In the near term, this acquisition, in combination with Konica Minolta- and MGI-based technology, accelerates Konica Minolta’s label press portfolio development and will surely contribute to the company’s ability to achieve its medium-term global growth targets in industrial printing (¥110 billion in FY2017, ¥120 billion in FY2018).

Acquisition Overview

Konica Minolta continues to demonstrate a willingness to achieve its goals inside and outside of print through an aggressive combination of in-house technology development, strategic investments and partnerships, and a high pace of acquisitions. Representing the company’s most print-centric acquisition in recent memory, the purchase of Muratec plays an important role in strengthening Konica Minolta’s core office print business, but more importantly will better position Konica Minolta to meet its ambitious industrial printing goals in the coming years.

About the Author
Keenan Thomson is Senior Analyst for gap intelligence, a San Diego-based consumer electronics, imaging, home appliance and IT market research firm with emphasis in helping product manufacturers and resellers understand current market trends in order to respond to competitive changes. Keenan is responsible for MFP-Copier and production print market intelligence services at gap intelligence, leads the company’s printing team, and is a manager of the analyst division.