The world of mergers and acquisitions (M&A) can be a complex one. Income statements, balance sheets, market strategies, product and service portfolios, primary vendor lines and any number of performance metrics can go a long way toward projecting whether a potential target will align with your organization. In the case of Cincinnati-based Donnellon McCarthy Enterprises (DME), the long road that leads to signing on the dotted line resembles courting and relationship building, a practice also replicated in producing an enviable corporate culture.
Certainly, this $25 million performer follows a number of the customary due diligence practices employed by many of the industry’s M&A players; after all, DME has closed on six deals since 2017 alone. But beyond the financials, there’s a world of insight that can only be attained through frequent, meaningful dialogs between the DME execs and the prospects being wooed. That’s when friendships are forged, comfort levels are attained and genuine candor is shared. Only then can CEO Jim Donnellon pop the question that can either solidify or sever the potential union.
“My line is, ‘Tell me what you haven’t told me that you don’t want to tell me,’” he revealed. More times than not, the frankness shown by the prospect greatly outweighs any potential shortcomings that might derail a deal.
“You have to take the time to build a relationship and perform your due diligence,” Donnellon added. “Once you check it all out, more times than not, you’ll have a great marriage.”
As a 70-something-year-old executive, Donnellon has found his happy place both professionally and personally. He’s assembled a crackerjack management team that includes President Jim George and Vice President of Sales Rich Brandenburg, and he’s surrounded himself with an exceptional crew of 100-plus team members who are well versed in forward-thinking technologies. He gets to sit back and watch the company run; DME doesn’t run him, which is a gratifying distinction. He can still come to the office every day in retirement mode without actually being retired.
The present-day DME is a product of Donnellon’s purchase of ABS Business Products; he would later acquire Donnellon McCarthy and merge the companies in 2015. Today, following an onslaught of deals (NOE Office Equipment, Columbus Office Equipment and Solutions, Tri State Business Equipment, T&I Office Equipment, American Business Machines and Dollet Managed Services), DME has 10 offices in five states—Ohio, Indiana, West Virginia, Illinois and California.
The Dollet deal was a critical addition, as it catapulted the company’s managed IT services discipline to greater levels, complementing a mix of offerings covering everything from copiers and printers to MPS, production units, wide-format, mailing equipment and digital signage. Its customer base crosses into verticals including education, legal, health care, finance and government.
Mastering M&A
When it comes to M&A, Donnellon and George are adventure seekers who love taking to the road in search of targeted dealers. Whether it’s through peer groups or inquiries from dealer execs looking to exit the business, they’ve created a solid blueprint in identifying small- to mid-sized businesses that lack DME’s overall product and service firepower and/or the desire to make the needed investments to keep their dealerships attuned to the evolving needs of clients.
More recently, DME has been entertaining overtures and initiating conversations with larger organizations as it continues developing one of the most potent service propositions in the Midwest. And as the acquisition of San Diego-based Dollet proves, Donnellon and Co. aren’t shy about stepping outside their geographic comfort zone.
“We’re not going to back away from a location in Washington state or anywhere else, for that matter,” George noted. “With technologies such as Zoom and the ability to travel anywhere, we can bring companies into the fold and offer our portfolio to help them grow. We do want companies for which the owner is willing to stay on for a minimum of three years, which is important to ensure that their culture isn’t going to go away.”
Cultivating a culture where everyone is 100% invested and aligned with DME’s ideals is essential to the success of the organization. Case in point: during the company’s annual holiday party in Cincinnati, members from each of the acquired companies attended.
“We’re one team, one vision and one goal—that’s who we are,” George remarked. “We’re looking for winners and people who like to have fun. That’s our focus, and we’ve been thrilled with each one of our acquisitions.”
IT Gateway
DME had been relying on Dollet’s managed network services offering for years, writing bigger and bigger checks to the business for such a critical service component (producing 42% MNS growth over the previous year). So it made sense to explore a union that would allow DME to cross-sell its catalog to Dollet clients in addition to growing its own share and partnering with other dealers who could benefit. DME now has help desk capabilities with tier one, two and three engineers, and can serve clients in all time zones.
“Matt [McCutchan] and his team in San Diego have been key in aligning DME with world-class partners that really fit our aggregated go-to-market model,” Brandenburg noted. “We’ve benefitted from having clients on the West Coast and having a level of expertise that really helps us diagnose complex issues and complete projects after normal business hours. It’s been a win-win for us in bringing them in and integrating them with our team.”
While M&A has opened gateways to increased revenue, the impact of organic growth cannot be overstated. The company enjoyed a gross revenue boost of nearly 35% from 2020 to 2021, and DME’s 2022 is outpacing its pre-pandemic numbers on the strength of growth with existing customers. Helping clients set up remote operations and the burgeoning IT business accentuated the overall performance.
With most clients back at the office (its southern Illinois end-users have been slower to return and are at about 80% on-premises), DME has been able to recapture clicks. Education clients are huge across all the dealer’s offices, and net-new accounts are availing themselves of DME’s full portfolio, especially IT and cybersecurity offerings.
“We became more of a trusted advisor as opposed to the copier service dealer customers saw us as pre-pandemic,” George added.
Inventory hasn’t been a substantial issue for DME since early 2022. Having multiple lines (including Ricoh, Sharp, Toshiba, Kyocera and Brother) allowed the dealer to capture greater market share, and it was fortified with strong inventory during the darkest times of the supply chain saga. One of DME’s biggest takedowns, an education client, was able to take 375 units delivered directly from Japan in order to meet the deadline. DME was also able to procure A4 units in a timely fashion on the basis of its strategic purchasing power.
State of MPS
The past two years haven’t been kind to dealers’ managed print services (MPS) programs. According to Brandenburg, the key to maximizing MPS is to benchmark and monitor its performance on a weekly basis, all the while making changes to produce the desired results. One of the biggest changes came during a peer group meeting, when DME’s executives were introduced to Derek Shebby from Modern Sales Training. A former vice president in the Xerox chain, Shebby introduced a different approach that focused on simplifying the process while showing reps how they could better identify opportunities.
“We’ve been able to get some good momentum from this new strategy,” Brandenburg said. “We’ve seen a lot more leads and more deals that have come through from MPS in a short amount of time. It’s a constant conversation; it’s important to monitor your plan and make changes quickly if it’s not working. The other piece is educating your teams. Reps sometimes take the path of least resistance and overlook the things they’re not comfortable with. But if we can train them and give them the knowledge they need, it’s going to improve their numbers, especially as it pertains to MPS.”
Trained to Succeed
Another area that’s bolstered DME’s overall performance is its weekly training program. Held twice a week on Tuesdays and Thursdays during the first three weeks of the month, the program covers a wide array of topics, from MPS to production and the company’s mailing solutions. The goal is to arm account executives with knowledge that helps them ferret out opportunities and better establish themselves as trusted advisors with clients.
Each office general manager is tasked with bringing in subject-matter experts, manufacturing partners and sales leaders to guide the 45–60-minute sessions. Tuesdays cover product training, while Thursdays are geared toward enhancing sales skills. Each Wednesday, new employees participate in Mind Share, a program based on group dynamics and learning. Centered on success stories and challenges, Mind Share involves sales leaders within DME answering questions newcomers may have and offering best practices in a free flow of ideas.
All new employees go through DME University training as well, which consists of two weeks of initial in-house training as part of a 100-day educational curriculum. Employees work on their skill sets, knowledge and benchmarking—the third point entails benchmarks they must meet during those first 100 days. Lastly, all employees devise an annual plan that consists of personal and business goals. Meeting those aspirations goes a long way toward cultivating happy and productive employees.
The success rate for training sales is about 85%, according to George. Those who thrive are masters of cultivating relationships and can leverage the resources to have technical discussions with the dealer’s SMEs and become adept at selling solutions. The service/admin success rate is around 95%, which he attributes to the dealer’s investments in setting the stage for their success.
“We invest a lot of money into giving them the tools they need to feel good about themselves and their performance,” he said. “The turnover is minimal, if at all. That’s been great throughout the pandemic, because through peer groups we hear a lot about the difficulties dealers have been having with retention. Our people truly feel as if they’re a part of this team.”
Marketing Strategies
Quarterly business reviews have been instrumental in enabling DME to burrow deeper and wider into existing accounts. The dealer’s internal marketing team produces case studies that are proliferated through social media outlets, particularly LinkedIn, and reps can share them with clients and prospects. Mailchimp is a valuable tool for the dealer as a vehicle to market products such as new A4 releases and mailing software.
DME also includes literature stuffers with its mailed invoices as a way to reach the individuals responsible for signing checks and making decisions. That enables the dealer to provide insight into the products and services that clients may not normally associate with DME.
Working in tandem with manufacturers on various campaigns has also proven fruitful. DME recently performed a six-week training campaign for a group purchasing organization (GPO); one of its partners is a member of a health care GPO (among the largest in the country).
“That culminated with a call campaign we did with all of our offices,” Brandenburg noted. “They yielded some great opportunities and meetings that we frankly wouldn’t have had on that scale without their help in drumming up these new opportunities.”
Donnellon underscored the importance of involvement in chamber of commerce events in every city the dealership serves. That complements the community involvement furnished by employees, who are allotted PTO to serve non-profit organizations. DME also provided donations to Matthew 25 Ministries following a series of tornados that devastated Kentucky residents. While the practice of community involvement isn’t intended as a business catalyst, it underscores the dealer’s commitment to supporting those in need. It’s difficult for other businesses not to notice when they’re supporting a common cause as well.
“Our employees are very passionate about getting involved in the community, and as a leadership team, we strongly encourage it,” Brandenburg offered. “They’re our number-one asset. We celebrate their above-and-beyond efforts at our holiday party—staying late to take care of a customer, running toner out to someone in need, doing extra training—the small things that go a long way toward helping us spread the word about DME and our great people.”
Looking Ahead
DME’s leadership met for its annual two-day planning session in December to set the tone for 2023. Brandenburg feels it’s important to “leave your guns, badges and emotions at the door and get out of the business to work on the business.” The result is always the same—the leaders exit the meetings feeling stronger and closer, with more clarity as to the critical pieces needed to move the dealership forward.
“For us, it’s important to be able to execute, and part of that is the leaders working through their business goals and personal goals,” he said. “If we do that, then we’re hitting our goals as a company.”
Double-digit growth in every category is the ideal in George’s estimation. He projects for both 12 and 60 months, with profitability taking precedence over top-line revenue.
“As the economy does what it does, we’re in a great position to sustain ourselves as an organization, regardless of what happens,” he added. “My expectation is we’ll be growing, and we’re going to be doing it organically. We have a lot of things in place to ensure that we will grow. I feel very bullish about 2023.”
Donnellon is also confident in the team he’s assembled, secure in the knowledge DME is set for the long run. “I couldn’t be more pleased with these two guys,” he said of George and Brandenburg. “Everything they’ve done with their executive team is phenomenal. The bottom line is, you’re only as good as your people, and I’ve been fortunate to surround myself with great people.”
