KONICA MINOLTA COMPLETES ACQUISITION OF DANKA
July 8, 2008 - Konica Minolta Business Solutions
U.S.A. (Konica Minolta) recently completed its $240 million acquisition of
Danka Office Imaging Company, one of the largest independent suppliers of
office imaging equipment, software, support and related services and supplies
in the United States. According to Bill Troxil, who was promoted to president
and COO of the new Konica Minolta Danka Imaging, Danka has about 90,000 users
in the U.S. Konica Minolta recently held a Web cast detailing the terms of the
agreement and how the transition has gone to this point, as well as how it
hopes to gain a return on its significant investment.
The Terms
Under the terms of the agreement, the former Danka
group will be known officially as Konica Minolta Danka Imaging, and will
operate as a wholly owned subsidiary of Konica Minolta Business Solutions
U.S.A. The company will maintain its current office in St. Petersburg, FL. In addition, it will sell only Konica Minolta products on the MFP side going forward.
The company will continue to sell third-party solutions and services. While Konica
Minolta Danka Imaging will no longer be an authorized Canon or Toshiba dealer,
it has reached cooperative partner supply agreements with each vendor, and will
therefore continue to provide supplies and service for current customers who have
Canon and Toshiba products for the life of their existing machines. The company
will no longer offer HP’s Edgeline products. Troxil will report directly to
Indiana Nakagawa, the former executive vice president of corporate planning at
Konica Minolta, who will now serve as chairman and CEO of Konica Minolta Danka
Imaging.
Danka will also continue to carry Kodak’s product
line. Danka has had its share of problems in recent years, and some partly
attribute them to its acquisition of Kodak’s global copier business in 1996.
Since the acquisition, Danka has struggled to pay off or, more often, refinance
its loans, trim its costs and streamline its operations.
A Smooth Transition
Konica Minolta and Danka announced an agreement in
November 2007 that enabled Danka to distribute Konica Minolta products in the United States. Under the terms of that agreement, Konica Minolta began to market its
complete line of bizhub color printers and MFPs in select Danka markets earlier
this year. As a result, the majority of Danka’s locations have already been
sales and service trained, smoothing the current transition. Konica Minolta has
been aggressively training the remaining locations over the past several
months, and according to Kevin Kern, vice president of marketing for Konica
Minolta Business Solutions, every single Danka sales and service employee will
be trained on the full Konica Minolta product line within the next few weeks.
With the acquisition of Danka now complete, Konica
Minolta will have approximately 8,000 employees in the U.S. and more than 500 authorized dealers. The channel structure also includes 80 direct
branches as well as the Danka subsidiary, said Kern. According to Rick Taylor,
senior executive vice president and chief operating officer of Konica Minolta
Business Solutions, while there will be overlap in almost all markets with
Danka and Konica Minolta’s direct branches, the acquisition of Danka does not
expand Konica Minolta’s direct channel footprint and conflict between different
channels will be minimal. “The initial focus of the Danka branches will be on
upgrading the existing customer base,” Taylor said.
Konica Minolta made the decision to level the playing
field by making dramatic changes in its direct model in recent months, said Taylor, having changed Konica Minolta’s direct model to what is equivalent to a dealer
cost transfer price to establish a balanced distribution policy. “They [direct
branches] are now on a dealer cost profit and loss model, and have a profit
requirement that is consistent with other independent distribution in the
market place,” he said. Similar to Toshiba’s approach with its subsidiaries,
this helps to avoid any kind of price conflict with dealers and favoritism in
the market.
Return On Investment
Taylor is also confident that Konica Minolta’s
significant investment in Danka will be returned. Formerly the president and
CEO of Toshiba America Business Solutions, Taylor said that he has an intimate
knowledge of Danka due to his experience over the last 13 years as a major
supplier to Danka. In addition to conserving the capital requirements necessary
to enhance the capabilities of the field and technical sales force, the company
is also prepared to make whatever investments necessary to ensure adequate
supplies and parts availability, and will expand manpower in some markets as
well when necessary. “While we are not willing to give an estimate today of
what the investment will be, we would not have made the acquisition without a
clear understanding that we will invest the required sales and marketing in
particular to grow Danka,” Taylor said. He added that a lot of this investment
is already fixed, as Konica Minolta has reserved capital for radio and
television ads, public relations events, as well as after-market promotional
sales activities, all of which Danka will now be a part of.
According to Troxil, Danka’s current customer base is
regionally based, with a focus on major accounts, universities and large health
insurance companies. “We also have a large segment of production print business
in commercial print and service bureaus and a large population of high-end,
high-quality graphics customers,” Troxil said. Danka’s strength in the
production print market place was one of the most attractive aspects to Konica
Minolta, Taylor said. As evidenced by its recent partnership with Océ, Konica
Minolta hopes to grow its color and monochrome production business more in the
next several years. As for Danka, it will now have access Konica Minolta’s
capabilities in federal and state government accounts, as well as its small and
medium-size business (SMB) population and Fortune 1000 accounts.
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