enx magazine

Konica Minolta announced their intention to buy Danka, the struggling independent supplier of office equipment. Over the years Danka has had financial difficulties and have unlisted themselves from the NASDAQ stock exchange in December 2007. Even with these issues, Danka still retains a large customer base, serving 45,000 customers in the United States.

Under the terms of the agree-ment, the total purchase price will be approximately $240 million (U.S.). Danka’s last full fiscal put their annual revenue at $450 million. While this may sound like a very large organization, keep in mind that Danka pur-chased the Kodak copier sales force for almost $700 million in 1996. This acquisition brings to mind another major industry move from 2007, when Xerox purchased Global Imaging and their customer base of 200,000 for a whopping $1.03 billion.

This equates to $7,500 per customer. While some analysts accused Xerox of overpaying for Global, today most acknowledge that it was a great move. If that was a fair price move at $7,500 per customer, then $5,333 per customer looks like a steal, at least until you dig a little further.

This may be oversimplifying a bit, as there are additional con-siderations. For example, according to fiscal reports from February 2008 reporting on their first three quarters, Danka had a considerable amount of debt, which no doubt contributed to a Konica Minolta purchase price that was almost half of the company’s annual revenue.

The purchase also affects several of Konica Minolta’s competitors as Danka primarily markets Toshiba and Canon office equipment, among others. Danka also sells Hewlett-Packard (HP) products and was potentially one of HP’s largest distributors of their Edgeline devices.

While in many respects this purchase can be viewed as a defensive move against competitors, it appears to be more of an offensive play by Konica Minolta, as they are snapping up a massive chunk of customers that are currently buying competitive products. Essentially, Toshiba and Canon are about to potentially lose 45,000 customers between them as the majority of them would be expected to eventually convert to Konica Minolta products – a net gain for Konica Minolta. While Xerox’s acquisition of Global affected Canon, the impending loss of Danka may hurt even more coming just over a year later. Two out of three of Canon’s biggest reseller networks have gone away nearly overnight.

At the very least, this is an extremely disruptive move that further consolidates a continually shrinking list of office equipment vendors. The real question now is, who will buy IKON Office Solutions?

Over the years, a lot of com-parisons have been drawn between IKON and Danka. In the early 1990s, IKON (Alco Standard at the time) and Danka were raiding the “market” of independent office equipment dealers, essentially going city-to-city to acquire large, successful, independent dealers. At one point, IKON had over 800 locations. IKON experienced similar problems as Danka, although they have rebounded better from some difficult times in the late 1990s.

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