You have to give the office technology industry credit. Just when you think it’s become mundane and predictable, 2023 strolls into our lives and turns it upside down. Following three years of almost nonstop pandemic talk and the latest headaches in what seemed like a never-ending saga involving supply chains, 2023 had something to offer that was completely different and wholly unexpected.
Some of the year’s top stories were a breath of fresh air, one in particular was disgusting and revolting, and a third makes one optimistic and excited about the future of the industry.
Perhaps most intriguing of all is the fact that none of the Big Three had anything to do with mergers and acquisitions, which, in its own way, added a wrinkle to previous trends. Most of this year’s top 10 stories were impressive and encouraging, leading one to believe that 2024 could be a year for the record books. But let’s not get ahead of ourselves. 2023 weaved one of the most compelling tales of the last five years and deserves a thorough review.
DEALER REVENUES SOAR. A year ago, many of the industry’s top dealers were noting that revenues were either approaching or exceeding 2019’s pre-pandemic levels. As for 2023? It was a year that likely exceeded everyone’s expectations. For evidence, look no further than this year’s Elite Dealers roster. Of the 104 companies that were included in 2022 and 2023, 54 of them reported an increase. The top three revenue thresholds ($400 million-plus, $100-$400 million and $50-$100 million) saw 17 of the 21 companies post an increase, and many of those bumps were significant. DEX Imaging, Flex Technology Group, Impact Networking, RJ Young and UBEO Business Services were among the biggest risers. Those dealers that maintained revenue levels were primarily clustered in the $5-$10 million range and the sub-$5 million category (the combined pair comprised about half of the total), where the ranges don’t reveal whether a company was up year over year. So, how many returning Elite Dealers posted lower revenue year over year? One out of 104, and it was by less than a million bucks.
Naturally, there are variables that helped goose the figures in 2023. Many dealers had been sitting on orders from 2022 that they were unable to fill because of the supply chain situation. Equipment delays were all but a memory by the end of 2022, and dealers were able to take delivery and install the units. One could also point to the fact that many of the aforementioned high performers are M&A mavens and benefitted from acquired companies that juiced their totals. Still, there was plenty of growth in the mid-market, with companies leaping into the higher revenue divisions. Braden Business Systems merits kudos for jumping not one, but two divisions from 2022 to 2023 (from $10 to $20 million to $50-$100 million). The big question is, will the big gains recede across the industry now that the supply chain has been unclogged? Stay tuned.
NINESTAR BANNED. As shock value goes, it would be difficult to unseat the early summer announcement by the Department of Homeland Security (DHS) that Ninestar, a $3.6 billion global manufacturer of printing equipment and supplies—not to mention the majority shareholder of U.S. manufacturer Lexmark—was banned from importing its products into the United States. The rationale? Ninestar is one of many Chinese-based companies accused of employing slave labor to manufacture its products. More specifically, Ninestar was added to a registry called the Uyghur Forced Labor Prevention Act (UFLPA) Entity List, their goods banned in the U.S. as of June 12, for “participation in business practices that target members of persecuted groups including Uyghur minorities in the [People’s Republic of China].”
The mere thought of people from anywhere around the world being forced to work against their will as slaves is difficult to reconcile, and the DHS finding essentially was a “guilty until proven innocent” declaration that runs counter to our judicial system. Ninestar responded by suing DHS in the U.S. Court of International Trade. It seeks an injunction to suspend its inclusion on the UFLPA Entity List to mitigate what it sees as devastating and unwarranted financial and reputational harm accruing daily. A hearing on the injunction was scheduled for last month. Meanwhile, Lexmark and Static Control announced they would be sourcing cartridges, supplies and printers from other sources.
TOSHIBA-RICOH JOINT VENTURE (JV). Perhaps the one piece of news from 2023 that’s destined to impact the industry for years (perhaps even decades) to come was the May 18 announcement that Toshiba Tec, parent company of Toshiba America Business Solutions (TABS), agreed to a joint venture that will combine manufacturing operations with Ricoh. The companies will remain separate and competitive in certain product circles, but the combination of manufacturing operations will include some JV-developed technologies in the long term. The JV manufacturing operations are slated to commence in the second quarter of 2024, although the joint developments likely won’t take place until 2026.
The OEMs have worked together in the past; TABS employs Ricoh- manufactured accessories in its products and is a leading DocuWare (owned by Ricoh) reseller. TABS President and CEO Larry White believes the JV has the propensity to add one or more other manufacturers, as the combined operations will result in significant manufacturing cost savings, respect the individual brands and their competitive posture, and lead to jointly produced innovations. White and other observers feel this could be the impetus for more JV agreements that will enable OEMs to be more streamlined at a time when print volumes are declining.
PRODUCT EVOLUTION. Diversification has been the talk of the industry for quite some time, but two areas in particular saw a significant boost during 2023. It may be the Year of the Electric Vehicle Charger and Ecommerce, as both garnered headlines for their high levels of adoption by the dealer community, and 2024 is expected to see the ranks burgeon on both counts.
The EV charger—which a number of dealers became enamored with during a tech presentation at the 2023 Executive Connection Summit (ECS) in Arizona—has populated the industry thanks in large part to Access Control Devices (ACDI) and its Terra Energy Services (later rechristened ACDI Energy Services). With the number of electric vehicles on the road expected to swell considerably, the demand for more suppliers just to keep pace is substantial. As for ecommerce, it’s a concept that’s not new. However, in the past 24 months (fueled by Keypoint Intelligence’s release of the UVERCE platform), a multitude of dealers have signed on and are in the early stages of online selling.
WELCOME BACK, DEALER. Someone sounded the “coast is clear” alarm early this year, as manufacturers welcomed their reseller partners to events across the country after a pandemic-induced pause that prevented in-person gatherings. Some companies hadn’t held dealer conferences in four or five years and yearned to provide much-needed updates regarding products and technology innovations.
The ECS kickstarted the year in fine fashion with a strong January program that attracted many of the industry’s heavy hitters. Epson—which held its last big event mere days before the pandemic shutdown measures were implemented—followed with its InkBoldly event in Huntington Beach, California in February. Sharp invaded Las Vegas for its National Dealer Meeting in mid-April, and Lexmark held its BSD Summit in Lexington, Kentucky, with a splash of bourbon. Nashville, Tennessee (and the Country Music Hall of Fame and Museum) were the backdrop for Canon’s Dealer Summit in mid-June, while Miami set the stage for Xerox’s Partner Summit. Toshiba’s LEAD Beyond graced the Bellagio Hotel in mid-September, its first LEAD gathering since 2018. And Ricoh, which hosted regional events in late 2022/early 2023, brought dealer partners to scenic Denver for its Partner Summit. As a footnote, a substantial number of dealers resumed hosting events for their clients. In all, it was a bountiful year for racking up frequent-flyer miles.
CORNER OFFICE ADDITIONS: There wasn’t significant leadership turnover in comparison to the past few years. However, a number of office dealers recognized some of their longstanding star performers with promotions to executive posts, including several sales vice presidents who slid into the president’s chair. On the manufacturer end, Xerox named John Bruno its president and COO. Gordon Flesch Company President Patrick Flesch tacked CEO onto his business cards. Melissa Confalone was named president of Fraser Advanced Information Systems, and AJ Baggott assumed the same role for RJ Young.
At Cincinnati-based Prosource, two executives were named to the president’s post, with Jay Cartisano taking the helm of the company’s imaging and managed print division. Jeff Loeb was tabbed as president for Prosource Technologies, the organization’s managed services arm. Also, Lake Business Products turned to Jeremy Wood as its next president and CEO.
DEAL BREAKERS? Is it our imagination, or did someone let the air out of the M&A balloon? After a 2022 that saw an unprecedented number of deals, acquisition activity plummeted this year. Actually, 2023 started with a flourish, culminating with a week in mid-March that saw six companies acquired in one week. Perhaps it was the beginning of the end, for the past six months have yielded comparatively few transactions. There were a couple major moves: Flex Technology Group obtained Advance Business Systems and Novatech swung a deal for Carolina Business Equipment. The major players were a little less active—DEX Imaging picked up Hendrix Business Systems late in 2022, its eighth deal of the year. Novatech also hauled in ACT Business Machines. Marco tallied three deals: Karpinski’s Office Systems, Laser Tone Business Systems and Hunter Business Systems. UBEO Business Services added Seacoast Business Machines, COECO Office Systems and Spriggs.
Elsewhere, Gordon Flesch Company added Oshkosh Office Systems, and Applied Innovation picked up Mid-City Office Systems. Usherwood Office Technology completed a deal for Reprographics of New England, and Braden Business Systems landed Lafayette Copier. Doing Better Business acquired Cooper Business Machines, and Nauticon Office Solutions added Digital Office Products. GoodSuite acquired Amerimac Office Products, and Kelley Connect swung a deal for Oasys. WiZiX Technology Group picked up Toshiba’s Reno (Nevada) branch, and EDGE Business Systems obtained Mailing Systems of Georgia. A.D. Solutions bought Core Imaging USA, and Atlantic Tomorrow’s Office added ACP Technologies. Fisher’s Technology acquired Alter Enterprise, and DocuGraphics obtained Custom Cloud Solutions. Donnellon McCarthy Enterprises picked up the Columbus, Ohio, operations of Applied Laser Technologies, and Pacific Office Automation nabbed Fenton’s Office Solutions.
Other deals saw Standley Systems acquire Verity Group and ACP added LaserCycle USA. AllPrinterRecycling obtained Hensley Industries, and Total Document Solutions picked up Business World Inc. Pearson-Kelly Technology added Digital Printing Solutions, and Stargel Office Solutions reeled in Round Rock Copier. On the distributor side, ACM Technologies acquired RTI LLC, and Central National Gottesman picked up S.P. Richards. Valsoft Corporation added device data specialist NEXERA.
XEROX REPOSITIONS ITSELF. The days of Xerox hotly pursuing HP in full view of the business community seem so long ago. That acrimonious drama was put in a holding pattern when the pandemic struck, and last year’s unexpected passing of CEO John Visentin saw the manufacturer at a crossroads. Steve Bandrowczak took the CEO helm, and, as earlier noted, John Bruno became president and COO.
The manufacturer cut the remaining ties to the former regime in September, acquiring all company shares owned by activist investor Carl Icahn and associates for $542 million. It was Icahn who backed Visentin’s quest to take on the significantly larger HP, and HP CEO Enrique Lores objected to a union due to the considerable debt load it would place on his company. Separately, Xerox extended its manufacturing agreement with Fujifilm, committing to spending $1.17 billion on products manufactured by Fujifilm.
CASH INFUSION FOR VISUAL EDGE IT. Once one of the most prominent M&A players in the industry, Visual Edge IT is moving forward with its long-term growth objectives after receiving a $40 million capital infusion commitment from Encina Private Credit and funds managed by Ares Management. According to the company’s executive officers, Visual Edge IT is committed to its growth platform and expanding its footprint, which could signal more strategic acquisitions in addition to its organic growth initiatives.
In 2018, the company—then known as Visual Edge Technology—embarked on a string of acquisitions that greatly expanded its base. Today, the company has 69 locations across the country. In April 2021, it announced a rebrand as Visual Edge IT, the culmination of a two-year project that saw the organization augment its roster of IT service technicians and sales professionals.
MANUFACTURER’S SPLIT PERSONALITY. For years, EFI has been synonymous with its flagship product, the ubiquitous Fiery digital front end (DFE) that is at the heart of many a printing engine. Apparently, the organization decided that Fiery can (and should) fly on its own as a separate company operating independently while still owned by Siris Capital Group. Toby Weiss, the longtime COO and GM of Fiery, took command as its CEO. Frank Pennisi assumed the same executive mantel for EFI.
EFI is turning its attention exclusively to industrial inkjet, focusing on the packaging and corrugated, display graphics, textile and building materials/décor spaces. That leaves Fiery to continue providing DFE technology for production and industrial printers, and to continue expanding into strategic adjacencies, such as its acquisition of CADlink Technology Corp.
