Icahn is Right: The Xerox Debacle Shows Why Your Dealership is More Valuable Than Ever
When the Fuji-Xerox merger was called off, and the new board at Xerox was pursuing other options, I thought it was just a ploy to extract a better offer from Fuji. My sense now is that Icahn and Deason have a better plan—and better options. Their thoughts about hiving off their leasing portfolio in North Americais the first clue that they are on the right track. It also shows why the office equipment dealer channel is incredibly undervalued, and with that realization, so is your dealership.
Equipment financing has long been the lifeblood of this industry. A contract where a business agrees to pay you money every month, is a valuable asset and it’s easy to value. It has a built-in interest rate, and when your business has hundreds or even thousands of these, the predictable monthly income is something all investors seek—and pay a premium for. When you are Xerox and those totals are in the billions, then it attracts a lot of attention.
One thing that investors forget, is that in order to secure all of these contracts, Xerox owns the most powerful sales engine in the industry.
Keep in mind, Xerox already had the largest direct sales team in the industry, as well as a very successful agent model that includes over 400 smaller regional players. So, how valuable is that?
Well, consider that companies such as FlexPrint, DEX Imaging, Marco, and Visual Edge are all being backed up by private equity groups to acquire independent dealerships. Roll-ups are nothing new in our industry, but there have never been so many active companies on the hunt for business. Still, Xerox is far larger than any of these companies, and in a sense, their roll-up is complete.
The asset portfolio is one attraction here, but the value of the sales channel is far greater. Every new technology and product category is hunting for a path into small businesses. Keep in mind, 63% of all job growth since 1993 is in small business. Xerox has more contracts with small businesses in North America than any other entity. It's not a faceless relationship either, it’s a personal relationship. Typically owners and finance people. A local, personal relationship. That’s gold.
Growth in office equipment is going to be tough long-term, but leveraging that relationship and layering other products into the offering is where the real accelerator is.
This is why I believe so strongly in the future of the office equipment channel. The opportunity to add more technology to your “stack” of products is here. If there is one weakness here, it’s that current sales methodology of face to face sales needs to adopt a more digital workflow. Laptops, software subscriptions, security, cloud storage, and even furniture can be accessed via an e-commerce website, that leverages your long-standing relationship as a trusted partner.
While there may be a good opportunity to sell your business today, it is also a good time to think about why so many companies want to buy it. Maybe they see the value you are missing.