While I very much enjoy learning from smaller dealers and hearing their stories, I totally get that most of the channel spotlight is soaked up by the mega dealers. And even if I’m a words guy who loves to chew through thick novels, I totally get that numbers do not lie.
Let’s take a closer look at dealer acquisition numbers around the mega dealers…
Mega Dealer: A dealer in the print industry that has annual revenue of over $100 million.
Some historical perspective before we really get going here—specifically, we’re talking US dealer buying US dealer: There were 64 such acquisitions in 2018 and 62 more the following year, with mega dealers accounting for 53 of the 126 and Visual Edge making a staggering 15 in 2018 alone.
Cue COVID. Movement in the channel took a nosedive as 28 acquisitions were closed the year COVID took hold in the US—not surprising given the conservative financial behavior of companies during a pandemic, but perhaps still a surprisingly high amount to some of you. Activity then increased to 35 acquisitions in 2021. During this two-year span, where lockdowns came and went and the urgency of vaccines took root, mega dealers were responsible for 21 transactions, with over 75% of those acquired dealers having annual revenue of less than $5 million.
Bringing us to the first quarter of 2022. We have seen nine acquisitions this year in the US, which puts us on pace to be right around 2021’s total. Mega dealers made four of them, including UBEO’s purchase of Centric Business Systems in Maryland. This move helped UBEO broaden its reach in the Mid-Atlantic states, but more critically to this conversation, it was the first dealer-dealer acquisition in the US in the $50-$100 million range since prior to the pandemic. I’d been wondering when a deal of this magnitude would happen, but now I’m left wondering when the next one will happen.
Since 2020 UBEO has been one of the more active mega dealers on the acquisitions front, as have Marco and Novatech, but with seven purchases over that time, Applied Imaging has been the biggest player. After eliminating some of its competition by buying The Polack Corporation (annual revenue of $10-$20 million) in its home state of Michigan in October 2021, Applied Imaging then doubled down—literally—by closing two more deals at the end of the year. The acquisition of Advanced Imaging Systems (annual revenue of $20-$50 million) was the more significant of the pair, enabling Applied Imaging to begin its journey in Indiana with a healthy footprint and providing it with even more flexibility in its bottom line.
Keypoint Intelligence Opinion
“There won’t be any dealers left to acquire” is a familiar joke you hear after another acquisition is announced. But with approximately 1,950 dealers in the US today, we still have a long way to go, folks. It should also not shock you that the trendline points to more smaller dealers, many of which struggle to diversify through all things managed IT and other subscription services, being gobbled up by bigger fish. The interesting sidebar here is that five of the seven mega dealer transactions in the past two quarters were with companies that had annual revenue of more than $5 million. Hmm…
Acquisitions took a backseat to things like cash flow, furloughs, the Paycheck Protection Program (PPP), and remote work in 2020. Last year saw an uptick in activity and hybrid work, all while major supply chain issues were ongoing. If we see 40 dealer-dealer acquisitions in the US in 2022, with 15 of those coming from the mega dealers, the result would be another year of increases—I believe it will happen.
Learn more fun facts and stats from the world of dealers and dealer acquisitions in the Flat Rate Academy livestream below. Many thanks again for having me on, West McDonald and Ken Edmonds!
Log in to the InfoCenter to view dealer research, reports, and studies through our Channel Strategy Advisory Service. Please email me at carl.schell@keypointintelligence.com if you’d like more info on the service or just want to talk about dealers.
