Spying on New Acquisitions -Berto takes a peek
The Chinese have been busy buying up well known, successful western brands as they seek to build a stronger market share in foreign markets. SCC, Cartridge World and Lexmark are obvious examples. Will the iconic Xerox be next? How about Clover, Turbon and Katun?
As would be expected in a mature industry, imaging supplies is deep into its natural business cycle with manufacturing, distribution and retail all having experienced significant consolidation. In each of these channels, there are only a small number of large organizations remaining.
The typical consolidation path is usually accompanied by reduced profits as the remaining players fight for market share and, as government regulators step in, further consolidation is restricted. On the face of it, and at this stage in the imaging supplies business cycle, there may, therefore, be expected to be fewer options for future M&A activity.
However, some aspects of our industry may be unusual compared to other mature industries.
How many 30-year old industries can generate 80-90% gross margin from any of their products? Normally competition would have eroded these margins to much lower levels. However, because high margins can still be earned on imaging supplies and, as will be discussed later because distortions in the distribution model exist, there are pent up forces for change that cannot be contained indefinitely and that may be addressed through future M&A activity.
Berto #29: July 5, 2015: Spying on New Acquisitions -Berto takes a peek
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