Livin’ on the (Visual) Edge
Thoughts on Acquisitions, Services, and More with David Ramos
David Ramos is a unique and intriguing individual to say the least. A graduate of the University of Alaska Anchorage, he’s worked for the Xerox Corporation, IKON Office Solutions, Strategy Development, and InfoTrends (part of Keypoint Intelligence). He’s quick-witted. Sharp. His stories tend to leave listeners laughing but also questioning things. And, he knows a little bit about the dealer channel.
In short, David Ramos is the man with the plan.
“Visual Edge Technology provides the funding for its organizations to invest in new business, new systems, and better marketing,” said Ramos, Chief Strategy Officer for VET. “When you get the infrastructure part right, selling becomes easier.”
Since Q4 2014, when the company bought Commonwealth Technology in Lexington, Kentucky, VET has been among the acquisition leaders in the industry. This year alone, the company is on pace to bring 20-plus businesses into its family. Revenue for this year will finish well over $300 million. Along with the literally insane number of acquisitions that have propelled VET into the future, it’s still experiencing double-digit organic growth.
“For a company that started out in chip design and waded through the murkiness of the recession in ’08, it’s been a total transformation to get to this point,” he said. “The concept behind Visual Edge for roughly a decade now has been one of an aggregator: We buy organizations in order to cover services in the print and IT arenas.”
|David Ramos, in an Uber on his way to an acquisition target.|
While acquiring businesses is a core competency of VET, there are four other areas that, in the near term, the company would like to see major gains in. “When you have over 100,000 customers across the US, you have no choice but to constantly think about what you can sell to them—if you focus on print only, you shortchange yourself,” Ramos said. “From an organic growth standpoint, managed IT is our top priority.”
VET has purchased three IT firms (N2N Technologies, Netwise Resources, Zymphony Technology Services) in the last couple of years to help support the cross-pollination of print with IT. Because so much IT work is done remotely, Ramos has no intention of scooping up IT organizations in every imaginable region, but he did say that he has his eye out for “talented firms with talented employees” as techs are always in demand.
“For us, the first ‘gate’ with any adjacent space is to diversify revenue by 10 percent—we’re well over halfway to that goal with IT,” he said. “Ultimately, the idea is to achieve 24-7, nationwide IT support coverage, all done as a branded service. Our IT houses keep their names so they don’t lose that sense of boutique-y-ness, it’s just that they’re powered by Visual Edge.
“Everybody is looking for a $20 million IT firm with 20 percent EBIDA, but you’d have a better shot at finding a unicorn,” Ramos continued. “I’m very happy, though, that all VET dealers opted in to our managed IT investment program, which obviously speaks to just how critical this initiative is to the company.”
“For a company that started out in chip design and waded through the murkiness of the recession in ’08, it’s been a total transformation to get to this point. The concept behind Visual Edge for roughly a decade now has been one of an aggregator: to buy organizations in order to cover services in the print and IT spaces.” –David Ramos
Another crucial area for the company is MPS, specifically to have a “true”—contractual, not transactional—A4 strategy, especially with SMBs (“they only have so many resources, somebody has to manage it”). To unlock this, Ramos believes the key is cross-company education and training. The two VET dealers that are most successful with MPS, to the tune of 10–15 percent of their total revenue, are consistently imparting their wisdom on the others.
“I remember when there were fax specialists, then color specialists—MPS specialists are even more important than them,” he said. “The bottom line is that half of output is printed in the office, and 75 percent of that is output on printers. If you don’t have a strategy to address the A4 market, whether it be service takeovers of existing devices and eventually A4 replacement of those devices or via device consolidation with workgroup A3 or A4 devices, you’re imposing limitations on your ability to address the total opportunity to capture output revenues.”
|A quick look at Visual Edge technology’s locations throughout the United States…|
So, about the other half of output, on what type of devices is that printed?
“If you’re not in production, you’re not addressing half of the total addressable market—for all intents and purposes, every day you go to work you have abandoned half of the market,” said Ramos, who added that approximately 50 percent of the dealers VET has acquired since 2014 sell some form of production equipment, while the company strongly encourages the others to get onboard. “Our Xerox business, whether as a dealer or agent, has been quite adept at selling production, but this area for some of our other organizations could be tough because production requires a unique skillset. And if you look at the data, you’ll see that production print is growing, which offsets the decline of print volumes in the office.”
As Ramos explained, the document imaging industry is mature so the idea is to find pockets of growth and then go for it. With wide format, while it’s not as big of an opportunity as both managed IT and production, it’s still one of the five big initiatives on the company’s plate. He highlighted the fact that wide format is another area that needs specialists: To address that, VET did what it’s best at and acquired axsa imaging solutions. This dealer will be leaned on to provide education and training to other organizations in the Visual Edge family that want to get more involved with wide format, seeing as 98 percent of axsa’s revenue stemmed from this space before it began selling other types of hardware.
“For us, the first ‘gate’ with any adjacent space is to diversify revenue by 10 percent—we’re well over halfway to that goal with IT. Ultimately, the idea is to achieve 24-7, nationwide IT support coverage, all done as a branded service. Our IT houses keep their names so they don’t lose that sense of boutique-y-ness, it’s just that they’re powered by Visual Edge.” – David Ramos
Commonwealth Technology is a great example of what VET—the holding company—calls a core company, which refers to the largest dealer in a particular region. Acquired organizations in the same territory as a core company are satellites, while a fold-in is more service-based, in all likelihood on the smaller side, so the marquee might go away in these cases.
The company’s acquisition strategy is multipronged: “Rule No. 1 is that we don’t buy distressed assets,” Ramos said. “We’re not interested in dealers where the principal is looking to retire or get out of the business (Ramos noted, however, that they have allowed that to occur with tuck acquisitions)—we want successful organizations that have the hunger to constantly reach new heights.
“We have no interest in disrupting the acquired dealer, from day-to-day operations to how it goes to market or how it provides service,” he continued. “No employees lose their jobs. It’d be foolish to eliminate people who have helped contribute to the growth and success of that company. And we aren’t a consolidator, we certainly don’t want to strip out the positive culture. I’ve seen that movie before, where the consolidator guts the essence of what made the company successful. It doesn’t end well.”
VET incentivizes the presidents of the companies under its banner to acquire other businesses, but those businesses would then be labeled “A Visual Edge Company”, and Ramos reported that some acquisition targets are on the radar for over five years and that he speaks with some once a quarter. “The word ‘no’ isn’t eternal,” he said. “It could just be ‘no, not right now.’ I’d say about 10 percent of conversations we have with dealer principals in their location turn into a purchase. It behooves dealers to at least check into the process to see what the acquisition space is all about, it’s intellectual curiosity. Acquiring companies is not a 90-day sales cycle—the pipeline for M&A is much, much longer.”
But Ramos and Visual Edge seem to have a beat on that.
|Visual Edge Technology is headquartered in North Canton, Ohio, with over 80 locations across the United States, including TLC Office Systems (The Technology Hospital) in Houston.|