Novatech CEO Dan Cooper took time from his busy schedule last week to meet with CJ Cannata of The Cannata Report. In this first of a multi-part series, Cooper discusses Novatech’s acquisitions strategy, identifying the types of companies and markets that are a good fit.
Anything new on the acquisitions front for Novatech that you can talk about now?
Cooper: Our pipeline is robust. You don’t see as many acquisitions being announced right now. A little bit of that is the market resetting itself. You still have high expectations from the sellers, and it’s just looking for a match. But we’re close on a couple of transactions, and we think we’ll be making some announcements this summer.
What makes a good fit for Novatech when you’re looking at a potential acquisition of a traditional office technology company?
Cooper: We are looking for companies that do both managed print and managed IT, that’s number one. Two acquisitions we’ve done, one in Florida and a smaller business in Chattanooga, both offered managed IT and managed print. Those are the type of companies we’re looking for—that are doing both and preferably have a really good skillset set on the managed IT side.
Our primary acquisition focus is on the top 50 markets in the country. And then, from the top 50 markets, are we interested in being in that market today? We’re not interested in being in the Northeast today or California. Texas, Florida, Alabama, Georgia, North Carolina, and Virginia are markets that we’re interested in.
When we look at it, we’re looking for job growth, we’re looking for a good economy, and we’re looking for availability of employee talent that can continue to grow the business.
But you will make the occasional exception when it comes to location?
Cooper: We did a deal in Milwaukee, and people were like, “I thought you guys were buying companies in the south.” I said, “Milwaukee is the 48th largest market in the country. They’ve got a great labor pool. They’ve got a great economy. They’ve got people moving there.” It fit the profile for us.
When looking for an acquisition, what’s important is customer satisfaction and tenured people, and a commitment to serve the customer. Do they bring something to Novatech that’s going to improve the company? As an example, the deal we did in Milwaukee, they had really large account and a [strong production print business].
We also acquired a company, ManagedPrint [in South Carolina]. They were a pure-play HP A3 A4 partner, but they had really good experience in healthcare. We picked up really good customers, but we also picked up the skillset of understanding enterprise Healthcare.
For us, we look for great customers, great employees, and are they going to bring something to Novatech from that overall standpoint? Are they in the technology business? Are they in a market that we know is growing and will continue to grow and add to our footprint?
Are you concerned that the decent potential acquisition candidates for Novatech will eventually dry up?
Cooper: There’s a lot of runway on the IT side, whether it’s software or managed IT. At Novatech, we’re not necessarily looking to buy the biggest or the greatest in every market. We’re just as comfortable buying companies between $5 and $10 million as we would a bigger company because we believe that we can provide a lot of growth.
We acquired a company last year in Melbourne, Florida that also sold into Orlando. Melbourne is a top 100 market, but Orlando obviously is a bigger market.
We already had customers in Florida, so Florida, as an overall market, is a big growth area. What they brought to us is the capability to take over the service of all of our company’s customers in Florida and to expand that business into a market like Orlando.
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