{"id":45323,"date":"2021-06-03T12:23:30","date_gmt":"2021-06-03T19:23:30","guid":{"rendered":"https:\/\/www.enxmag.com\/twii\/?p=45323"},"modified":"2021-06-03T12:23:33","modified_gmt":"2021-06-03T19:23:33","slug":"deal-me-in-goodbye-pandemic-hello-office-dealer-transactional-frenzy","status":"publish","type":"post","link":"https:\/\/www.enxmag.com\/twii\/feature-articles\/2021\/06\/deal-me-in-goodbye-pandemic-hello-office-dealer-transactional-frenzy\/","title":{"rendered":"Deal Me In: Goodbye Pandemic, Hello Office Dealer Transactional Frenzy"},"content":{"rendered":"\n
\"\"<\/figure><\/div>\n\n\n\n

The first quarter of 2021, by all accounts, has been a bit of a snoozer in the office technology dealer space, particularly on the mergers and acquisitions (M&A) front. Sure, there was a spate of deals earlier in the year, and Konica Minolta garnered attention for divesting some of its direct operations out west to All Copy Products and Pacific Office Automation. By and large, however, it has been a dormant period, for obvious reasons.<\/p>\n\n\n\n

With the pandemic curtailing much of the transactional activity, the result is a backlog of deals that were in varying stages of completion. Parties found it difficult to agree on the value of a business because the trailing 12-month data no longer reflected a true performance measure. That didn\u2019t bring action to a complete standstill; earnouts and other valuation tools enabled parties to reach an accord, while others used various metrics to determine a fair price for all parties. But by and large, most buyers and sellers were willing to take a wait-and-see approach rather than pull the trigger.<\/p>\n\n\n\n

Based upon conversations we\u2019ve had with dealers for the June State of the Industry report on M&A, anecdotal musings and general murmurs throughout the industry, transactional activity is drawing closer to the \u201csee\u201d stage as opposed to \u201cwait.\u201d The summer months will likely yield a cavalcade of M&A announcements, many of which have been completed in the last 60-90 days but not yet made public. This post-pandemic summer will enable many negotiations to pick up where they left off.<\/p>\n\n\n\n

It is easy to characterize the current environment as a buyer\u2019s market, especially with the plans of many dealers who were seeking to exit the industry in 2020 joined by other sellers seeking to exit or partner this year.<\/p>\n\n\n\n

Pumping the Brakes<\/strong><\/p>\n\n\n\n

\"\"
Doug Albregts, Marco<\/figcaption><\/figure><\/div>\n\n\n\n

\u201cBuyers are ready and willing to acquire,\u201d noted Marco CEO Doug Albregts. \u201cHowever, I think they are adapting to the new variables presented during COIVD, such as the downturn in the office environment. The availability of federal PPP funds, coupled with cost reductions, has enabled companies to maintain a positive balance sheet through this period. While the mechanics of a deal are not any harder, gaining agreement on valuation can be more challenging.\u201d<\/p>\n\n\n\n

John Lowery, president of Applied Imaging and arguably the most active buyer during the pandemic period (including one transaction that was wrapped up in a mere 60 days), has seen his share of motivated sellers in picking up four office dealers, a telephony specialist and a managed network services operation. Lowery has certainly been in the driver\u2019s seat in negotiations.<\/p>\n\n\n\n

\"\"
John Lowery, Applied Imaging<\/figcaption><\/figure><\/div>\n\n\n\n

\u201cTypically, (sellers) are hedging their bets a little, waiting for us to come up with a price,\u201d he said. \u201cIn a couple of cases, we had sellers tell us what they were looking for price-wise. So it is a buyer\u2019s market. But not on the MNS and telephony side. They\u2019re looking for a different multiple, and their industry wasn\u2019t impacted the same (as office dealers). We grew that side of our business by 18% during the pandemic. This year, we might double our size through acquisition and organic growth.\u201d<\/p>\n\n\n\n

Given the ramifications of the pandemic, Jim Sheffield feels the notion of taking a little money off the table is in the best interest of dealers looking for an exit. The CEO of Texas-based UBEO Business Services believes many companies will find operating in the post-pandemic environment challenging, especially as their competitors grow larger and seek refuge with acquisition-minded rollups.<\/p>\n\n\n\n

Consequences of Inactivity<\/strong><\/p>\n\n\n\n

In essence, Sheffield cautions against the dangers of inactivity for those embattled firms sitting on the fence.<\/p>\n\n\n\n

\"\"
Jim Sheffield, UBEO<\/figcaption><\/figure><\/div>\n\n\n\n

\u201cYou have Marco in the northeast, Flex out west, Visual Edge, Novatech\u2014some really big players,\u201d he said. \u201cThen you have independents like Chip Crunk\u2019s company (RJ Young) buying up dealers, and Pacific Office Automation in the northwest. For a mid-to- smaller-sized dealer, there are choppy waters out there. Your business is probably your No. 1 asset, so do you want to wait and get yourself surrounded? That\u2019s how you have to look at it, to some degree.\u201d\u00a0<\/p>\n\n\n\n

While the desire may be there for sellers, Dan Ruhl\u2014partner with Flex Technology Group\u2019s private equity firm, Oval Partners\u2014the fear of taking a pandemic-related discount for their business keeps many prospective sellers on the sidelines. But he sees many buyers\u2014including Flex and its partnership platform\u2014becoming more engaged in the short term.<\/p>\n\n\n\n

\"\"
Dan Ruhl, Oval Partners\/FTG<\/figcaption><\/figure><\/div>\n\n\n\n

Should traditional print-related business take longer to resume its pre-pandemic pace, it could further hamper the ability to identify a clean and accurate 12-month trailing performance, and hence, devise a fair transaction price.<\/p>\n\n\n\n

\u201cWe have more liquidity than we did pre-pandemic, and our company is performing really well,\u201d he noted. \u201cAs a result, we want to move forward with transactions. Another consideration is, there\u2019s going to be some part of print that is down longer-term, not just in the short term, but nobody knows the answer to that yet. It creates a little bit of a dynamic where it\u2019s hard for the buyer and seller to agree on price, which is why I think a lot of deals will have to be structured with some kind of earnout or catch-up.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

The first quarter of 2021, by all accounts, has been a bit of a snoozer in the office technology dealer space, particularly on the mergers and acquisitions (M&A) front. Sure, there was a spate of deals earlier in the year, and Konica Minolta garnered attention for divesting some of its direct operations out west to All Copy Products and Pacific Office Automation. By and large, however, it has been a dormant period, for obvious reasons. With the pandemic curtailing much of the transactional activity, the result is a backlog of deals that were in varying stages of completion. Parties found it difficult to agree on the value of a business because the trailing 12-month data no longer reflected a true performance measure. That didn\u2019t bring action to a complete standstill; earnouts and other valuation tools enabled parties to reach an accord, while others used various metrics to determine a fair price for all parties. But by and large, most buyers and sellers were willing to take a wait-and-see approach rather than pull the trigger. Based upon conversations we\u2019ve had with dealers for the June State of the Industry report on M&A, anecdotal musings and general murmurs throughout the industry, transactional activity is drawing closer to the \u201csee\u201d stage as opposed to \u201cwait.\u201d The summer months will likely yield a cavalcade of M&A announcements, many of which have been completed in the last 60-90 days but not yet made public. This post-pandemic summer will enable many negotiations to pick up where they left off. It is easy to characterize the current environment as a buyer\u2019s market, especially with the plans of many dealers who were seeking to exit the industry in 2020 joined by other sellers seeking to exit or partner this year. Pumping the Brakes \u201cBuyers are ready and willing to acquire,\u201d noted Marco CEO Doug Albregts. \u201cHowever, I think they are adapting to the new variables presented during COIVD, such as the downturn in the office environment. The availability of federal PPP funds, coupled with cost reductions, has enabled companies to maintain a positive balance sheet through this period. While the mechanics of a deal are not any harder, gaining agreement on valuation can be more challenging.\u201d John Lowery, president of Applied Imaging and arguably the most active buyer during the pandemic period (including one transaction that was wrapped up in a mere 60 days), has seen his share of motivated sellers in picking up four office dealers, a telephony specialist and a managed network services operation. Lowery has certainly been in the driver\u2019s seat in negotiations. \u201cTypically, (sellers) are hedging their bets a little, waiting for us to come up with a price,\u201d he said. \u201cIn a couple of cases, we had sellers tell us what they were looking for price-wise. So it is a buyer\u2019s market. But not on the MNS and telephony side. They\u2019re looking for a different multiple, and their industry wasn\u2019t impacted the same (as office dealers). We grew that side of our business by 18% during the pandemic. This year, we might double our size through acquisition and organic growth.\u201d Given the ramifications of the pandemic, Jim Sheffield feels the notion of taking a little money off the table is in the best interest of dealers looking for an exit. The CEO of Texas-based UBEO Business Services believes many companies will find operating in the post-pandemic environment challenging, especially as their competitors grow larger and seek refuge with acquisition-minded rollups. Consequences of Inactivity In essence, Sheffield cautions against the dangers of inactivity for those embattled firms sitting on the fence. \u201cYou have Marco in the northeast, Flex out west, Visual Edge, Novatech\u2014some really big players,\u201d he said. \u201cThen you have independents like Chip Crunk\u2019s company (RJ Young) buying up dealers, and Pacific Office Automation in the northwest. For a mid-to- smaller-sized dealer, there are choppy waters out there. Your business is probably your No. 1 asset, so do you want to wait and get yourself surrounded? That\u2019s how you have to look at it, to some degree.\u201d\u00a0 While the desire may be there for sellers, Dan Ruhl\u2014partner with Flex Technology Group\u2019s private equity firm, Oval Partners\u2014the fear of taking a pandemic-related discount for their business keeps many prospective sellers on the sidelines. But he sees many buyers\u2014including Flex and its partnership platform\u2014becoming more engaged in the short term. Should traditional print-related business take longer to resume its pre-pandemic pace, it could further hamper the ability to identify a clean and accurate 12-month trailing performance, and hence, devise a fair transaction price. \u201cWe have more liquidity than we did pre-pandemic, and our company is performing really well,\u201d he noted. \u201cAs a result, we want to move forward with transactions. Another consideration is, there\u2019s going to be some part of print that is down longer-term, not just in the short term, but nobody knows the answer to that yet. It creates a little bit of a dynamic where it\u2019s hard for the buyer and seller to agree on price, which is why I think a lot of deals will have to be structured with some kind of earnout or catch-up.\u201d<\/p>\n","protected":false},"author":166,"featured_media":45324,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1650,82,87,1638],"tags":[3487,3510],"_links":{"self":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/45323"}],"collection":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/users\/166"}],"replies":[{"embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/comments?post=45323"}],"version-history":[{"count":2,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/45323\/revisions"}],"predecessor-version":[{"id":45326,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/45323\/revisions\/45326"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/media\/45324"}],"wp:attachment":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/media?parent=45323"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/categories?post=45323"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/tags?post=45323"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}