HP Inc. has announced a definitive agreement to acquire Apogee, a move that expands its services portfolio in contractual office printing and MPS categories, where solutions are increasingly important for SMBs
Consolidation within the print industry is not new. Nor indeed is the news that OEMs are acquiring dealerships – think Ricoh acquiring IKON, Kyocera’s purchase of Annodata and more recently Sharp’s acquisition of Midshire. However, this latest transaction, which values Apogee as of closing at £380 million, is one that will undoubtedly be a game-changer in terms of the impact it will have on both OEM and channel vendors. IDC analysts Jacqui Hendriks and Sharon McNee, describe it as a very strong offensive and defensive move by HP Inc. in the battle to conquer the market.
Hendriks said: “The key benefits that HP Inc. cited after it split from HP Enterprise was the ability to focus on print and be more agile – rapidly acting on potential investments to drive business growth. One of its key strategies is to gain a strong foothold in the copier/MFP market through developed or acquired skills often associated with traditional office equipment or copier dealers.”
She continued: “This is the first example of it extending its go-to-market capability through channel acquisition and perhaps there is more to come. By choosing to acquire rather than partner with a major channel player, HP Inc. is imitating the approach traditional copier market players adopted in order to increase their customer base and limit opportunities for their main competitors.”
Apogee has for some time been on an acquisition trail, securing private equity funding and integrating multiple independent resellers into its ever growing business. The biggest deal (as reported in PITR March 2017), was of course the acquisition of Danwood – reportedly the UK’s largest independent provider of document technology and managed print services to SMEs and the corporate and public sectors in the UK and Ireland.
According to IDC, Xerox was in the running to acquire Danwood – a major Xerox as well as HP partner. “Having lost Danwood to Apogee, Xerox is in danger of losing Apogee as a significant channel partner,” McNee said, adding: “Xerox has a global channel strategy that includes seeking channel players for acquisition. In Europe, this activity is very selective. However, Xerox will need to move faster if it intends to execute on this strategy.”
Investing in A3 business
HP has been investing in the A3 business with strategic initiatives including the acquisition of Samsung’s printer business in late 2017, and the launch of a portfolio of superior A3 and A4 multifunction printers based on unique IP and value-added services and solutions.
In a statement announcing the completion of its $1.05 billion acquisition of Samsung’s printer business in late 2017, HP President and CEO Dion Weisler said: “Together, we will build more than 30 years of print leadership to accelerate our strategy, disrupt new market opportunities and provide our customers and partners with unique and highly innovative print solutions.”
This latest transaction furthers the company’s plan to disrupt the $55 billion A3 copier market and builds on its printing strategy to enhance its A3 and A4 product portfolio, build differentiated solutions and tools to expand its managed print services and invest in its direct and indirect go-to-market capabilities. This includes the selective acquisition of OEDs that provide access to increased profit pools from higher margin services.
Profitable and progressive
IDC 2018 Western European Hardcopy Survey indicates that companies want to work with experienced print service providers who can demonstrate their ability to execute and support their business process document workﬂow initiatives.
Apogee is a profitable and progressive dealership with strong capabilities in contractual printing services and solutions, an experienced leadership team and access to SMB and mid-market customers. “HP Inc. made a good decision in choosing Apogee given its experience in managed services and its specific ability to develop and support higher margin services,” Hendriks said.
“Apogee has been growing in strength providing access to new skills, new customers and a greater geographical reach. In addition, it is very experienced in pre-sales, post-sales and servicing,” McNee added.
“The Apogee acquisition extends HP’s print leadership by boldly leveraging the industry shift to contractual sales as we aggressively pursue the A3 office market,” said Enrique Lores, President, HP Imaging and Print. “We’re augmenting our go-to-market and enhancing our ability to deliver the services necessary to win in the profitable contractual market. This deal complements our broader channel strategy and HP remains committed to building our business through our best-in-class partner program.”
“HP Inc. is not just buying an MPS provider,” Hendriks said. “Apogee has a very broad portfolio including production, wide-format (graphics and creative), signage, posters, wrapping and 3D as well as digital document services (on-site and off-site), digital and hybrid mail, professional services, software solutions and variable data printing. With adjacent services in mind, Apogee also offers desktop service such as disaster recovery. Although this announcement refers to managed print services, there is also potential for Apogee to support HP Inc. in these other areas,” she added.
Commitment to the channel
The deal is expected to close by the end of 2018, pending regulatory review and other customary closing conditions. Following the close, HP says that Apogee will operate as an independent subsidiary of HP, with a governing board comprised of HP and Apogee management.
More than 85 per cent of HP’s business comes with or through the channel, and much of its future success is reliant on the health of its partnerships. In a communication sent to HP partners, the company said: “Given the market consolidation and changing customer landscape, this acquisition is an important step in our strategy to advance the opportunity in contractual office printing.
“We do not take our partnership with you, nor the strength of our channel, for granted. While we have one of the strongest channel programs in the industry, we know we must earn your trust, respect and business every single day. The entire team and I remain committed to you and to the channel.”
HP also assured its partners that Apogee will not receive preferential treatment or terms and that it will have access to the same programs and tools that its partner network has today.
“HP Inc.’s existing channel partners will be counting on its promise that Apogee will not be given preferential treatment and that channel conﬂict will be avoided,” McNee commented, adding: “HP Inc. will need to manage this situation very closely to avoid damaging relationships with loyal partners.”
Other vendor relationships
According to Hendriks, this acquisition calls into question Apogee’s other vendor relationships. Apogee is currently counted as one of the main partners for Canon and Ricoh and a significant partner for Konica Minolta and Kyocera. IDC expects HP Inc. to swap out competitor offerings in favour of its own over time.
“As office printed page volumes decline, vendors aim to transition customers from transactional to contractual engagements to secure three+ years of recurring revenues with the opportunity to provide print and document management solutions as SMBs particularly prepare to automate their document workﬂow,” she said. “The European SMB market represents a huge market opportunity for all printer/MFP vendors and consequently, many are investing heavily in channel education and training and support programs to enable the channel to develop services- and solutions-led engagements. Channel programs must consider that huge skills gaps are often identified among channel partners. Partners like Apogee who already can demonstrate print services experience are extremely valuable,” she added.
A twist on market consolidation “This is a twist on market consolidation,” said McNee. “Apogee was instrumental in channel consolidation particularly in the UK market and HP Inc. has now amplified this consolidation. Although the acquisitional activity within the channel seems to be currently focused more on the UK, IDC expects to see further channel consolidation as major channel players seek to grow and printer/MFP vendors look to fill their skills gaps with partnerships and further acquisitions.”