(Pictured above, Michael Brigner, senior vice president, Mergers & Acquisitions, Visual Edge)
Michael Brigner and David Ramos discuss Visual Edge’s acquisition strategy.
There’s no such thing as an overnight sensation in the imaging industry. But there are quite a few dealers in the channel that have grown at a record-breaking pace since the millennium either organically, via acquisitions, venture capital dollars, or any combination of the three. Then there’s Visual Edge, an organization that has transformed itself from a virtual non-entity in the independent dealer channel to one the channel’s biggest players in just six short years.
The company is no stranger to acquisitions in the channel having made its first back in 2004. After the economic downturn of 2009, the company took a step back before starting up again in earnest around 2013. Since 2014, the company, through a combination of organic growth and more than a dozen acquisitions, has grown from $19 million into a $200+ million entity.
Last year they acquired eight dealerships. A ninth, or the first of this year, depending on how the deal is finalized, is expected to close any day now. If things go according to plan, expect to see a fair amount of acquisitions activity in 2018.
To better understand the Visual Edge acquisition strategy and its plans for imaging industry dominance, we spoke with Mike Brigner and David Ramos, two of the executives responsible for acquisitions. Brigner, with a rich history in the industry dating back to 1974 with companies such as Xerox, Savin, IKON, and Sharp, has been with Visual Edge since 2006 while Ramos, following stints at Xerox, IKON, Strategy Development, and InfoTrends, joined the company last year.
As we began our conversation, both Ramos and Brigner made a point of clarifying that unlike a couple of groups that are controlled by private equity, Visual Edge is not owned by a private equity group. Rather, it is a holding company owned by management, the board and its subsidiaries.
Perhaps the best way to describe the company’s acquisition strategy is to think of the old Alco Standard model of acquisitions. When Visual Edge acquires a dealership, it leaves the existing ownership and management team in place, and doesn’t change the name of the company or the product mix. A dealer who agrees to sell to Visual Edge commits to remain with the company for four years and must be interested in growing the company. Some dealers stay well beyond that initial four-year commitment. This is not an option for owners who can’t wait to bolt the business as soon as they have check in hand.
Ramos emphasized that when dealers join the Visual Edge strategy there is zero disruption to that company once it becomes a wholly owned subsidiary of Visual Edge.
“We do not have plans for rebranding any of the companies we acquire,” he said. “There is not going to be a Visual Edge sign in Canton, OH, or San Bernardino, CA, ever. We are not going to change the entrepreneurial spirit, their go to market strategy or the brands they carry.”
If a dealership is struggling, it’s unlikely that Visual Edge will be interested. Dealerships must be performing to industry standards and benchmarks, and be healthy from a profitability and customer retention standpoint.
“It is not our strategy to acquire distressed assets,” stated Ramos. “Companies that join our strategy are successful companies and we need the people and the intellectual capital that made that company successful to stay. That’s paramount to what we’re attempting to accomplish.”
But Visual Edge rarely says never. Rather, they’ll postpone the acquisitions discussion to when the dealership is performing better or there’s a mutual agreement as to the value of the dealership.
“I’ll discuss what they can do to get it there, and then we’ll continue the visit,” explained Brigner. “We have no time frame on any company joining our strategy. I’ve never said no, but have had a lot of postponements, and I check back with those people quarterly.”
As Visual Edge’s acquisitions have gone into high gear, Ramos and Brigner are finding it easier to communicate the Visual Edge story to prospects, particularly since management at previously acquired companies provide excellent references.
To date Brigner has relied on referrals for identifying prospects while Ramos has tapped his personal relationships with dealers forged during his roles in the industry.
Geography is a key factor and Visual Edge knows which markets they want to be in from a print and an MITS perspective targeting locations that offer the best opportunities for organic growth beyond the acquisition component of the business, noted Brigner.
That’s not to say that Visual Edge won’t talk to someone outside those preferential geographic regions as long as they have a successful, well-run business.
“I don’t walk away from any good business opportunity,” said Brigner.
Most dealers who meet with Visual Edge are looking to get to the next level—a level mutually agreed upon by the dealer and Visual Edge. Visual Edge then provides the funds to help make that happen.
One lesson Brigner learned observing Alco Standard’s strategy and by watching Global Imaging is that you don’t talk to dealers about acquiring them unless you already have the funding in place. He says one of the first questions he often gets when meeting with a dealer is, “Do you have the money to have this discussion with me?”
“I don’t make calls or talk to people without knowing the money is there to make this work if it’s a mutual opportunity,” said Brigner.
Beyond specific revenue expectations for the dealerships who become wholly owned subsidiaries, Visual Edge has expectations from an operational and profitability standpoint. Those expectations are mutually reviewed and agreed upon annually by Visual Edge and the dealer.
“We expect them to maintain a certain level of performance,” said Ramos. “We do a thorough job of due diligence from predictive [revenue] standpoint. We set those expectations along with them. We don’t dictate that. It’s an open and honest conversation throughout the process.”
Brigner says the sky’s the limit on the opportunity and potential for 2018 and going forward.
While neither Brigner nor Ramos are comfortable going on record as to the specifics of what’s in the pipeline for 2018, expect to see a few close before the end of February. The goal for the coming year, minus specific target numbers, is to grow exponentially, and add personnel to facilitate that growth such as the recent addition of Michael Mills as vice president.
“That’s a lot of integration, due diligence, and heavy lifting,” emphasized Ramos.
The other point that both Brigner and Ramos stress is that Visual Edge is not just an office solutions company, but an office technology company with a Managed Service Providers corporate strategy. The company is investing heavily from a managed growth initiative into Managed IT Services.
“We are making a huge investment to be best in class in the Managed IT space,” stated Ramos. “That is a core pillar of our future and what our companies do effectively. We are not abandoning print and have some other organic growth initiatives [for print] as well, but growing in the Managed IT space is our number one priority.”
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