Saturday, February 26, 2011

ARC may renew acquisition growth strategy during 2011

For Owners in the Reprographics business who are interested in selling their companies. When Suri (of ARC) was asked a question about ARC’s interest in looking at acquisitions, Suri’s response was “yes.” Due to the downturn in the A/E/C reprographics business, ARC has not, at least that I’m aware of, completed an acquisition of a reprographics company since 2008. Looks like ARC may resume that part of its growth strategy in 2011.

I say that because of a question Suri was asked during the ARC earnings call that took place on Feb 22nd, 2011:

from “Questions ….. from Scott Schneeberger – Oppenheimer”

“And then the second being it seems a little bit early for you to be opportunistic with regard to doing tuck-ins. But you did mention that you’re putting your sales force aggressively out basically going after those smaller than you that may have struggled more. Is tuck-ins now part of the story there? Or is it more just grab their share directly, without the formal engagement? Thanks.”

from “Response from ….. Suri Suriyakumar - ARC

“Right. So to address your first question, Scott, obviously cost reductions is always mindful because we are continuing to fine-tune our operating costs. Now when you are talking about cost reductions, we close locations, branches – there can be two approaches. One is we close a branch because we simply want to cut cost, because we are compelled to cut cost, we want to reduce our operating costs. So we would just cut the branches. And we did some of that at the early stage, but we refrained from doing too much of that because we want to position the company for growth. Second reason we would close a branch is because of the technology transition which is going on, combined with the fact that we are becoming more and more with the single identity as one company. There is a lot of savings we can gain by centralizing the back offices, by centralizing some of the branches. So technology is driving that. We are seeing more and more customers employ technology. So we are starting to see benefits of that. So those kind of branch closures or consolidations we continue and we continue to do that aggressively because it actually makes us more efficient and reduces our costs and allows us to actually leverage our existing assets.”

“So that will continue. We don’t see any reason for drastic cut in branches yet and thanks to the high yield we have we feel like we have a stable debt structure so that we can focus on the growth and investing on technology. With regard to tuck-in acquisitions – absolutely. It’s more and more on our radar screen and we are watching it and we will continue to work on those, because we are constantly bumping into companies – either they are really lost a large amount of sales, finding it difficult to continue to operate, looking for the exit strategy. And most of these are private companies and where we find that we can provide an exit strategy for an existing owner, we will pick them up, because that wouldn’t be like a traditional acquisition, it would be much more attractive.”

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