Supply and demand is the foundation of economics, but consolidation is its logical and inevitable destiny. In our industry, the pace of mergers and acquisitions continues at a breakneck pace, providing new opportunities and a bunch of new challenges to everyone throughout the imaging channel ecosystem.
Few companies have embraced this aggressive strategy with more vigor than North Canton, Ohio-based Visual Edge, which until its recent and likely brief pause, has been on a buying spree of major proportions, snapping up something close to 24 companies over a two-year period of unbridled expansion.
Some of these acquisitions were of $5 million or $10 million or even $50 million-dealerships. Others were strategically focused on firms that have best-of-breed IT infrastructure expertise in order to position this emerging giant for robust growth as the industry continues to transition from diminishing print revenue and profits to the more lucrative managed IT services market.
With this remarkable growth comes the associated size (combined annual sales in excess of $300 million and growing), scale, and the precious, invaluable experience of coordinating and capitalizing on the opportunity to incorporate dozens of recently acquired copier dealers and IT firms under a single umbrella.
More than anything, Visual Edge’s vision and execution gives it more options – options specific to its own eventual business destiny and options for their growing family of imaging solutions companies as well as the customers they, in turn, serve.
Some of Visual Edge’s top executives spent some time with me talking about the company’s recent past and promising future at the recent ITEX show held in Las Vegas. In fact, the way the company participated at ITEX – with IT services sales teams and sales managers joining other top executives for formal and informal interactions – is just another small example of who Visual Edge is as a company.
“(Our) sales managers are here because we want them to understand what this IT thing is, and we want them to supervise the 400 print salespeople to bring the leads (coming from) the engineers we’re hiring,” said Austin Vanchieri, VE’s chairman and CEO. “We want to penetrate our base.”
That base currently exceeds more than 70,000 customers and is perhaps as many as 90,000 customers, said Vanchieri. He also strongly believes that while selling printers and copiers and managed print services still matters, the future of Visual Edge, its dealers and the industry as a whole is all about managed IT.
To that end, they’ve invested heavily in both dollars and design to build out the technology infrastructure required, to not only serve its existing portfolio of companies and customers but to make the company a viable and attractive option for larger, higher-margin managed IT engagements that were previously out of reach.
“The value I think is coverage, geography,” Vanchieri said. “If you want to be a national company and you want to get into IT, you better have T3 engineers all over the place.”
Visual Edge has invested heavily in network operation centers throughout the country and employs more than 70 Level 3 engineers. Thanks to its 2017 and 2018 acquisitions of Netwise and N2N Technologies, it now has a 24/7 network call center in Indianapolis that can handle needs big and small from customers around the country.
“With managed IT we can now approach current customers saying ‘I have a more diverse product offering and I can take care of everything from print, MPS and telephony to complex managed IT services.’ Because of our broad vendor relationships, we can continue to bring more to the table,” said COO Brian Frank.
Frank makes a compelling case. “With print sales declining at about 1.5% a year and managed services growing at 11% a year, the path is pretty clearly defined,” he says.
“Why don’t we play there?” Frank asked. “We have 70,000 current customers and for our copier salespeople, one of the toughest challenges to overcome is finding a reason to call them. This is an additional offering that is beneficial to them. Once we control the customer’s network, we solidify a long-term relationship that is costly for them to break. We win with higher profit margins and they win with a one-vendor approach to their office technology.
“If, for example, Visual Edge was able to penetrate just 5% of its existing 70,000-plus customer base, that would be 3,500 new managed IT contracts or associated managed services accounts. With roughly 400 salespeople working this explicitly defined and very familiar base of customers, our new and recurring revenue grows exponentially and is now predicated on where the business is going, not as much on where it’s been.”
“Multiple solutions for 100% of the customers, whether it’s BDR or voice over IP,” said Mark Gibson, vice president and general manager of the company’s managed IT services group.
While acknowledging that’s a pretty lofty goal, Gibson said that’s the aspirational message he and others deliver to all their sales employees. At some point, perhaps within five years, it’s fairly realistic that Visual Edge will be providing multiple managed IT solutions to all or the vast majority of its customers.
This book of business is out there and attainable, Vanchieri said, because the foundation for success and the existing relationship with clients makes life easier for dealers.
“We have our salespeople and our service people,” he said. “They’re out doing their thing, making us money. Here are the other 600 employees doing all the things you need to do to run a business … warehousing, collection, finance and personnel. I have that already. So when I get into IT, all I need are tech and salespeople. I don’t have to build the infrastructure.
For the past four or five months, Visual Edge has curtailed its spending spree. As Vanchieri put it, “we bought 18 companies in 2018 and hit the $300 million mark,” but in order to coordinate all these new, disparate companies and ensure they continue to thrive while plotting the next stage in the company’s maturation, the company had no choice but to slow down.
“You can’t do that and buy a company a month,” he said.
Visual Edge had roughly $22 million in annual revenue back in 2014, so the ascent to the $300 million threshold has been, to put it mildly, brisk.
Focusing mostly on the SMB market – one that generally can’t afford the pricey consulting and technology services rates charged by the biggest technology vendors – could catapult Visual Edge ever closer to the $1 billion-a-year club.
“What happens is (SMBs) are sort of like (on) an island out there,” Vanchieri said. “Nobody’s been paying attention to them. It’s just wide open for us.”
If and when that happens, it becomes even more attractive to potential partners, acquirers and Wall Street underwriters.
“We’re all in this to build a great national office technology company,” Vanchieri said. “That’s the goal. What we’re worth will take care of itself.”
Vanchieri points out that unlike many acquisition-happy firms in other industries – even in or around the office technology sector for that matter – Visual Edge is not a private equity-backed outfit. That fact also provides intriguing options going forward.
Having skin in the game at all levels has a direct impact on how Visual Edge and its ever-expanding portfolio of dealers will approach the future and play a crucial role in determining its success. “They’re stockholders, so we have a common interest. It’s not just their salary. I give them options every year if they perform so we’re all goal-aligned” Vanchieri said.
There are always cultural issues – some more pronounced and divergent than others – whenever a company absorbs so many different companies and personalities in such a short period of time. Visual Edge isn’t just acquiring customers and equipment. It’s also retaining the most valuable resource of all: human expertise.
“We’re getting much better at managing our companies and understanding it’s not just about mergers and acquisitions,” Gibson said. “It’s also about operations and being able to bring best practice operations into play. Currently, investments and efforts are focused on equipping each of our acquired companies to sell and support a full portfolio of managed IT solutions.”
And while they believe the mix of business simply must evolve to a more services- and IT-centric approach, Visual Edge executives are also confident that the companies and people they bring into the fold are more than capable of adjusting and thriving for years to come.
“Every excellent dealer owner has their own way of getting to 15% (profit margin) or so,” Vanchieri said. “Their own way. Their own path.”
“We assemble entrepreneurs as a coalition into a larger entity while maintaining the spirit of the entrepreneur and his people,” he said. “Entrepreneurs don’t live on corporate stuff. The corporate stuff is a pain in their butt. But when you get 20 of them in a room, it’s a wonderful sight to behold.”
Patricia Ames is president and senior analyst for BPO Media, which publishes The Imaging Channel and Workflow magazines. As a market analyst and industry consultant, Ames has worked for prominent consulting firms including KPMG and has more than 15 years experience in the imaging industry covering technology and business sectors. Ames has lived and worked in the United States, Southeast Asia and Europe and enjoys being a part of a global industry and community.