Acquisitions could change the scale and scope of MPS providers around the globe.
In late August, everybody raised their eyebrows: Amazon.com founder Jeff Bezos went shopping again, this time swallowing up the reasonably well-sized organic food retailer Whole Foods.
Questions arose: Should someone have stopped him? What will happen to the employees, the food quality, etc.? No one stopped him, the voices have gone quiet again, and everything seems to be business as usual.
Meanwhile, has anyone counted the number of businesses offering managed print services that have changed ownership over the past 12 months? I surely lost count, as the news feeds kept reporting several deals every week worldwide.
Keeping my ears open for the noise around these deals, I expected to hear the same questions we hear for Amazon-like deals: Isn’t that company getting a bit too big? What will happen to the employees? Doesn’t that make the company a monopoly? However, there were no voices (or at least none we could publicly hear). Hardly anyone seems to question OEMs taking over dealerships, whether they are mono- or multi-brand. No one raises concerns when it comes to big dealerships taking over smaller ones, even across countries. What we do hear is a congratulations to the buyer on a great deal. We might also think (or maybe even hear) the smaller one got rescued.
Last September and October in The Cannata Report, we looked at the changes to the imaging industry based on the massive purchases throughout the year.
Today, I am interested in the question: Is this shopaholic-like behavior sustainable? How long do we have until the industry has eaten itself?
Let’s Go Shopping and Get BIG!
I am thinking of probably one of the most significant deals in the U.K. (actually, Europe) last year. Apogee swallowed up U.K.’s Danwood, making Apogee the largest independent managed (print) services provider in Europe. This particular merger, Apogee’s fourth since securing a significant investment from mid-market investor Equistone Partners Europe, produced an unbelievably dominant and powerful player in the MPS market.
Imagine how this newly established dominance changes Apogee’s purchasing and pricing power. Apogee (but also some of its few remaining competitors) can outbid any small dealership without feeling the pain. As a consequence, the smaller dealerships will struggle more and more, their value will depreciate, they eventually risk becoming a bargain purchase for a bigger one. Some may say, let them merge; this will save their jobs. However, will it?
The Amazonification of MPS
I remember a visit to New Zealand a couple of years ago. Walking around downtown Auckland, I had a same-same-but-different feeling: different country, same stores. Is this where we are heading with managed print services? Will we soon see the Amazons of MPS directing how we purchase, price, install, assess, review, etc. printers, print management, document management, consumables? Will these mega-dealers provide the user with a “dash” button to order paper, toner, and whatever else is required for the functioning document and imaging process, just like we purchase dishwasher detergent and tissues?
So far, the industry still maintains relatively healthy competition (yes, there is massive pressure on the margins, no doubt, but at least we still have multiple independent dealers submitting for one RFP). But just imagine what would happen if we are left with only two or three mega-dealers? I would equate that situation to considering purchasing from Target, Amazon, or Walmart today. Alternatively, should we just hand MPS over to those big guys since document processes will soon be digital anyway? Especially since there may no longer be a need for printers, related services, and consumables anymore, as everything will be in the cloud, and the required services providers advertise on the Amazon/Walmart marketplace? Pretty dark, of course, but don’t you think it’s quite realistic?