Action-Intell.com; The Real Inside Story Of Mse's Merger With Clover

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Date: Thursday July 3, 2014 12:10:06 pm
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    http://www.action-intell.com/2014/06/27/mega-merger-mania-the-big-just-keep-getting-bigger/
    The Real Inside Story Of Mse's Merger With Clover From Action-Intell.com
    Mega Merger Mania: The Big Just Keep Getting Bigger!

    by
    Charles Brewer, President, Actionable Intelligence

    I received word yesterday that the two largest remanufacturers in the United States, Clover Technology and Micro Solutions Enterprises (MSE), are merging. After witnessing a lot of M&A activity over the past year or so, I was aware that the urge to merge was strong within the third-party supplies industry. Heck, I’ve even predicted several times over the past couple of months that we should expect more mergers this year. Regardless, I didn’t see this one coming. Not at all.

    Of course, mergers and acquisitions are nothing new to Clover. Currently the world’s largest third-party supplies vendor, the firm got that way by buying up a lot of the competition. Clover grabbed headlines in 2005 when it acquired the North American and European compatible supplies divisions of Ricoh Printing Systems America (RPSA), which marketed third-party supplies under the Dataproducts brand as well as others. Over the next several years, Clover purchased Cartridges Are Us, GRC, and more. In 2010, the firm itself was acquired by Golden Gate Capital, a private equity group that owns such brands as California Pizza Kitchen, Eddie Bauer, and J. Jill, to name but a few. Purchasing the West Virginia-based reman West Point Products along with Clover, Golden Gate’s acquisition was a roll-up of sorts. In 2008, West Point had purchased Multi-Laser, one of the larger Canadian remanufacturers, and was among the top 5 remanufacturers in the U.S. when Golden Gate made its move.

    With the help of Golden Gate’s deep pockets, Clover has been able to grow both organically and through acquisition. Since April 2010, Clover has acquired a range of companies including various third-party supplies vendors such as Pinpoint, which is based in Redmond, WA, and manufactures compatible cartridges and ribbons for postage machines. In Europe, Clover purchased the TRS Group, a remanufacturing concern consisting of TRS AG, TRS Swiss, and Sakaar Printing Design and Engineering. In 2012, the company bought Germany’s K+U Printware GmbH and its empties-collection subsidiary, Collecture. The firm also purchased the two largest empties brokers in the U.S., Environmental Reclamation Services (ERS) and Office Products Recycling Associates (OPRA) along with Reclaim-it in the U.K. In addition, Clover bought Depot America, a provider of new and refurbished printer parts and printers and component-level repair service and technical support. More recently, Clover has demonstrated an ongoing interest in mobile-device recycling with the acquisition of Full Circle Wireless and Wireless Source.

    Although it has been quiet on the M&A front lately, MSE has also made certain key acquisitions in the past in the U.S. and Europe. I think its most recent purchases came back in 2007, when the company acquired Laser Imaging International (LII) along with LII’s sister company Perfect Ink as well as the Greenman Group, which was based in the U.K. Over the past couple of years, MSE has made investments in its own infrastructure rather than make purchases outside the company. In 2013, the company, which is based in Van Nuys, CA, doubled the size of its East Coast sales and distribution center with the opening of a 25,000-square foot facility in Pennsylvania. It also expanded its European distribution operations with the purchase of a warehouse and offices in Zeewolde in the central Netherlands. This year, MSE added a warehouse in Johannesburg to serve markets in South Africa and Southern Africa.
    http://evarykr.com/wp-content/uploads/2012/12/Mergers-Acquisitions-Career.jpg

    The merging of Clover with MSE will not greatly alter the competitive landscape, at least not in the near term. Obviously, both firms are large and well established and I doubt any third-party vendor will suddenly become aware of them and rush into their arms as a result of the merger. Moreover, while I haven’t seen many details about the deal, which won’t close until later this summer, it sounds like MSE will continue to operate under its own name with its current management team. So, for now, it would seem that it will be business as usual at MSE. Of course, the firm will have access to a wealth of global assets that should allow it to further grow the MSE brand both domestically and internationally. For Clover, it picks up what MSE claims is the largest remanufacturing facility in the U.S. MSE also has an assortment of proprietary technologies that Clover can now leverage across its product lines.

    While Clover should add around $100 million to its top-line with the acquisition of MSE, I think the real benefit of the merger will be revealed over time. If OEMs continue to secure general exclusion orders from the U.S. International Trade Commission, adding a large manufacturing center in Southern California will be of high value to Clover, which currently has several other ink and toner facilities in the U.S. The combined firms stand to pick up a significant amount of market share if U.S. Customs becomes more active in preventing infringing products from entering the country. I understand that Clover and MSE also have some fairly large clients, including certain OEMs that market remans, as well as office superstores and other retailers. These large customers will welcome the news that Clover will be able to produce more product in the U.S. rather than rely on imports that could be stopped at the border. For these larger customers, the merger means less supply chain worries. Who knows, the deal could even sway more large companies that were leery about the uncertainties of the industry to become Clover customers. And, last but certainly not least, adding MSE may at some future date allow Golden Gate to take Clover public, which is a move the industry has long expected.
    http://3.bp.blogspot.com/-3NL-WaNJIxY/TbWEdA1ikbI/AAAAAAAAACQ/PorXq6g0_v8/s320/Mergers.jpg

    Of course, supporting the combined companies could pose a problem for Clover in terms of its own supply chain. Even with ERS and OPRA, I have heard rumors that Clover has had some issues getting its hands on empties. Apparently, the OEMs are collecting a sizable amount of cores these days, thus denying larger remanufacturers their all-important empties. A couple of years ago, Clover’s Cartridges Are Use subsidiary initiated layoffs because of an empties shortage. Will this problem be compounded with the addition of MSE or is MSE’s empties supply robust enough to support it after the merger is completed? We can only wait and see.

    Of course, this is bad news for international firms looking to gain share in the U.S. I think it’s particularly bad for the German remanufacturer Turbon, which acquired Clarity Imaging and ILG last year in its bid to grow its business in the U.S. Like MSE, Turbon markets remanufactured cartridges that are known to be high quality, and  it will find it more difficult to compete with an even larger Clover, which now will have a couple of sources for high-quality cartridges including MSE and West Point. Turbon has articulated a growth strategy built around selling more color cartridges in the U.S., and MSE is known for marketing very good color cartridges. Turbon is also exposed to being limited in what it can import should GEOs be exercised more vigorously. Turbon faced both of these issues prior to the news of the merger, of course, but I bet the Clover-MSE marriage is worrisome to the German firm nonetheless. And it won’t just be troubling to Turbon. Other large offshore remanufacturers like Ninestar and Print-Rite will also feel more threatened by a bigger Clover.

    Overall, I think the merger is another sign that the supplies industry in the U.S. is on the mend after a number of tough years. Since the beginning of last year, there has been a lot of M&A activity in the industry. I mentioned Turbon’s acquisitions and there have been plenty of others, such as the distributor XSE Group’s buyout of Printer Essentials and, more recently, LMI’s acquisition of printer refurbisher Global Printer Services. This year, the well-known Canadian imaging supplies distributor Densigraphix Kopi, now renamed to Densi Corporation, was also purchased by an investor who took the reins at the company and shortened the firm’s name. It seems like banks and investors see the industry as a good bet these days and they’re willing to underwrite more deals. With all this M&A activity, I guess the big question becomes, who’s next? Stay tuned!
    https://fbcdn-sphotos-c-a.akamaihd.net/hphotos-ak-xaf1/v/t1.0-9/10155628_668336313260234_4347591804776010367_n.jpg?oh=40556a60ec64133cece75d210b3a54d8&oe=542E2D32&__gda__=1410829955_6021c2f8d20ba71a4902ad6ace479952

     

     

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