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Will 2018 see the long-expected industry consolidation gather pace? Part 1

As we start in a new year, we usually publish either a review of the year past or some prognosis on the year ahead of us. This year will be all about finding new business streams and consolidation. In the first part, we published a new initiative to support print channel dealers wanting to get into the IT services market. Now, we move on to address the topic of industry consolidation. We at IDeAs, along with other industry members have been forecasting a big shake up for some time. However, we also know that beyond the What, running a business is also about the When. Timing is of the essence.

 

The right time has come: software goes up (but slowly), hardware goes down (but slowly).

 

It looks like the long expected consolidation is coming true NOW. The rhythm of mergers and acquisitions has been taking place at an unprecedented pace.

There had been some signs last year with HP acquiring Samsung and a lot of dealer consolidation but now an acceleration is taking place. We list the most spectacular ones below (remember this is just two months since 1st of January 2018). As the New Year is just started, the consolidation is taking place at a brisk pace and in every aspect of our industry.

 

I will start with the Software side of the Industry where ECi acquired PrintFleet. I attach one of the best articles on the subject published in the USA, which refers to the impact on dealers. One thing to note is that PrintFleet is the engine for both Kyocera and Konica Minolta platforms, so it will be interesting to see what happens there.

 

What this tells us is that the Software market has peaked and now little growth is expected; therefore it is consolidating.

ECi has already such a device monitoring engine with the FM Audit acquisition, so it will be interesting to see how it evolves. Rationalising software development and the marketing & sales channel is not so easy, so we may see a scenario “à la Nuance” with multiple brands coexisting. ECi is not, based on its history, looking at “recreating” a new platform. For the industry, it is a pity as both product lines are not exactly young and Software has moved on since. This leaves a door open to newer players but they will need to find a strong value proposition to convince operators to “make the change”.

 

Continuing on the distribution side, we will consider the German and French markets. Some M&A activity has already been going on in both countries, following big moves in the UK in recent years (M2/SCC, Apogee/Danwood, etc….)

 

In Germany, our IMPSGA member Soennecken with 575 Mio€ revenues acquired on January 1st another cooperative specialised in IT services called Nordanex

In France, following the significant acquisition by Konica Minolta of Dactyl OMR (83 Mio€ revenues), we have seen in January the announcement of the merger of C’Pro (one of the biggest MPS dealers, 170 Million € revenue, 60,000 devices in MIF) with Quadria a 120 Million€ revenue IT integrator). For those not in France, you may have missed this but the size of the two companies and their aggressive business plan (from 290 Million€ to 600M€!!) is creating a substantial force in the French market.

 

Interestingly, the Print business model holds some very solid and fundamental values. One of the financial statements indicated that C’Pro has the shareholding majority in the new organisation thanks to its size (that is pretty standard) and its recurring revenues model (thanks to the print business model).

 

What this tells me is that the value of the service rendered becomes more important than the equipment put in place and that the power of hardware brands in such a world is less than it used to be. This is a combination of very significant resellers with a lot of buying power and a lesser brand appetite (powered by both the general quality of standardized products and generation Y attitudes to brands). This is a very powerful changing factor for our industry that used to be dominated by a dozen very good “product” brands.

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This article was written on 15 Mar 2018, and is filled under Business Forecast, Point of View.

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