Looking Over Clover Technologies Group: A Conversation with Clover Holdings, Inc.’s CEO Jim Cerkleski Since its founding in 1996, Clover Technologies Group has set the pace as a B2B environmental solutions provider, including the recycling and remanufacturing of imaging supplies. The company describes itself as the world’s largest collector and recycler of cell phones, inkjets, and laser cartridges. Its remanufactured toner and ink cartridges are sold through leading office products distributors and resellers, and marketed under a variety of private label brands. Annual revenues are more than $400 million, and with sustainability initiatives growing exponentially worldwide and an ongoing acquisitions strategy, it’s safe to say that figure has nowhere to go but up. On April 14, 2010 Clover Technologies Group was acquired by Golden Gate Capital, a San Francisco-based private equity firm, who at the same time also acquired West Point Products. Both companies continue to operate independently.                                  Jim Cerkleski, CEO of Clover Holdings, Inc. Recently, ENX had an opportunity to chat with Jim Cerkleski, CEO of Clover Holdings, Inc., the driving force behind Clover Technologies Group since he acquired the company in 2000. He is responsible for providing strategic vision and leadership as well as overseeing sales, business development, and strategic alliance initiatives. How’s business? Cerkleski: Business is going well. It’s hard to quantify that without looking at acquisitions, but I would say significant double-digit growth. Why do you think you’re doing so well? Cerkleski: We have seen an increased focus on cost savings and value through the recession, leading more individuals and companies to look at the cost advantages of remanufactured toner and ink products. We have also seen a push for more environmentally friendly products.  Why do office products distributors and computer imaging supply wholesalers like doing business with you?  Cerkleski: First, our expertise is the collection of assets and the remanufacturing and remarketing of those assets. This product line offers distributors and wholesalers a unique opportunity to drive incremental business by providing value and environmental benefits. Furthermore, our breadth of line and product quality that meets OEM performance gives them the ability to drive incremental growth in this category. How else does Clover Technologies Group differentiate itself from competitors? Cerkleski: First and foremost, we have built our foundation on the collection of empties through hundreds of different channels. Second, our business is 100 percent vertically integrated.  This means we own the closed-loop process. We collect the empty cartridges, employ our own engineers and R&D team, custom design our own automated machinery, manufacture in-house, and then recycle any unusable components so they are not released into the waste stream. One would think it’s got to be more costly doing the manufacturing in house and in North America. Are you still committed to that?  Cerkleski: We are 100 percent committed to our North America operations. As a vertically integrated organization we need to own 100 percent of the manufacturing process to ensure we meet our high quality standards. And, by having a shorter supply chain for the North America market it ensures we have the best product availability for our customers. We are also 100 percent committed to our global operations, which include manufacturing in Vietnam and Portugal. What is the biggest difference in Clover Technologies today compared to when the company was first founded in 1996? Cerkleski: The depth of our management team in every aspect of our business and the continued investment in infrastructure to support our growth. What do you mean by the depth of your management team? Cerkleski: We have a large management team, which is one of the things that make us unique. Senior leadership is comprised of over a dozen folks with years of experience in the imaging supplies and the office products worlds. Most of our senior management came out of the office products space and that’s why we gravitated to be the leaders on the office products side. We can speak that language. We have a lot of experience and add value to folks that run office products companies. We’re not just a manufacturer to them; we’re professionals and consultants that help them grow their business across all categories. When you talk about some of the continued investments in infrastructure to support your growth, what are some that you must make on a consistent basis? Cerkleski: People and equipment. We have more than 65 engineers in our company. We have designed, built, and deployed all of our own equipment to build laser cartridges, inkjet cartridges, and now our parts business with the acquisition of Image1. It’s been important to reinvest in that side of the business so we could build a better mousetrap than our competitors. More importantly though, it’s to keep up with what the OEMs are doing. The cartridges the OEMs are coming out with today are much more sophisticated. But because of our continued reinvestment in people, equipment and infrastructure, we have the ability to keep up with the new technologies being implemented. You’ve made a couple of big acquisitions over the years. Why do you think those companies were a good fit for Clover Technologies Group? Cerkleski: They either share similar management philosophies or have helped us achieve customer and market diversification. Tell me about the Image1 acquisition. Cerkleski: We acquired NER and its different divisions with the exception of Print4, their print management tool, and their racking division. We bought their supplies division completely, which was ribbons and all imaging supplies—ink and toner—and also acquired the parts division, which was a separate entity called Image1. We wanted to have that HP authorization and we wanted to grow parts internationally. I think that it is important for ENX readers to know that Clover is an international player. Where might we see you expand globally? Cerkleski: We’ve made acquisitions in Australia, Mexico, and we’re moving into New Zealand right now. The two areas we are looking at today are Asia-Pacific and South America. We’re also looking at India and have partners in Saudi Arabia. We’re truly going international and that’s how we see our growth. When you acquired the company was there an acquisition strategy or is that something that has evolved over time? Cerkleski: When I bought the company in 2000, I came out of a company in the office products world—USOP—that was making multiple acquisitions. They were making an acquisition a week and that was the reason they ultimately went down. I wanted to do things a little differently on the imaging supplies side by finding companies that had the same management philosophy, the same understanding of the growth opportunity in the business, and were focused on reinvesting in the business for future growth. We typically like to keep the management team intact and ask them to roll a percentage of their equity into the deal. This way they’re vested in it and you know they want to be there for the long haul. In April Clover Technologies Group was acquired by Golden Gate Capital. Tell us about the strategy behind that? Cerkleski: Their strategy is to develop an aftermarket imaging supplies portfolio. By starting their portfolio with Clover and West Point, it paves the way for them to develop a comprehensive, multi-channel platform positioned for rapid growth. For more information on Golden Gate Capital you can visit www.goldengatecap.com. How do you see this trend towards managed print services affecting your business and your product offerings?  Cerkleski: As a manufacturer and a provider of parts, we see managed print services as a huge opportunity. As it becomes more prevalent along with the desire to lower cost per page, it is inevitable that companies utilizing MPS programs move to a lower cost remanufactured product. Are you doing anything differently to market products for MPS-type engagements? Cerkleski: We do not sell MPS programs directly. Based on our customers’ needs, we will work with our partners to provide them with the best solution available. How do you support them? Cerkleski: We go in more on a consulting basis, educating them on some of the print management solutions that we’ve tested and used, and we tell them, ‘If we can help you with it, great, and if you want to do it on your own, here are the contacts.’ You seem to have a strong sustainability message. Is that something that’s been embraced enthusiastically by your resellers and distributors?  Cerkleski: Our customers have embraced this message and are aggressively going to market with it. Not only has it provided them with new opportunities, through a more diverse value proposition, but it also gives them a way to be better stewards of the environment. Besides MPS and sustainability, what do you see as some of the other trends that will impact your growth over the next few years? Cerkleski: Industry consolidation, our rapid growth, the expansion of Image1, which is our parts division, and diversifying into emerging markets. This will enable us to expand on our philosophy of ‘recapture, remanufacture, remarket’. What else can we expect to hear from Clover Technologies Group over the next 12-18 months? Cerkleski: We will continue to expand our collection programs, continue to grow organically as well as through acquisitions, and execute on our strategy to diversify outside of the ink and toner remanufacturing business. How might you diversify outside of the remanufacturing business? Cerkleski: Small electronics, printers, printer parts and services. Clover has always looked at emerging markets and diversification as a means to continue to grow our business and provide value-add products and services to our customers. As we move forward, we will continue to do that. Anything else you’d like to tell us before we wrap things up? Cerkleski: I think it’s important for the world to know that Clover’s management team and our 3,800 employees are dedicated to this business. I’m very lucky to be the CEO of this company and leading it, but quite honestly there are divisional leads in this company that run the day-to-day business and do an unbelievable job. That’s because the management team owns the company. All of those leaders have options or equity in the business and they treat it as their own.     Scott Cullen has been covering the office equipment industry since 1986 and he’s thankful that MPS is giving him something new to write about.