Xerox has announced it will acquireGlobal Imaging Systems, a provider of automated office equipment, network integration services, and electronic presentation systems, for US$1.5 billion, or $29 per share, in an all-cash transaction.
The deal is structured in two steps: a cash tender offer for all Global Imaging Systems outstanding shares, followed by a cash merger in which Xerox will acquire any remaining GISX common stock.
There is a high likelihood that the deal will go through, Frederic Ruffy, an analyst with the investor education firm Optionetics, told the E-Commerce Times.
“As evidence, [Global Imaging Systems’ stock] is up $9.15 to $28.65 and is very close to the takeover price of $29.00 a share,” he noted. “If there were more uncertainty, one would expect to see a larger gap between the market price and the takeover price.”
However, since the deal is for cash and the terms are straightforward, investors seem to be taking the view that the merger will take place at Xerox’s offering price of $29 a share, Ruffy concluded.
Assuming the transaction does close, what does it say about Xerox’s direction? Until now, the firm has contented itself with one-off acquisitions that built up services around the hardware it sold — a common strategy among IT hardware vendors. With this acquisition, though, it appears to be moving beyond organic growth supplemented with strategic acquisitions.
Global Imaging supports primarily small to mid-size businesses. Xerox is primarily a strong enterprise vendor, but it has lately made overtures to the SMB space with a targeted product line and services. For example, Xerox recently expanded its distribution partnerships to better target small and mid-sized businesses.
The Global Imaging acquisition, though, will increase the company’s exposure to this market by 50 percent. Xerox is particularly eager to target this space, pointing to IDC statistics that show installs of office printers and multifunction products in small and mid-sized businesses increasing at a compound annual growth rate of 15 percent over the last five years.
The acquisition would provide Xerox with a conduit to move Global Imaging’s customers from imaging solutions they might have purchased in the past — e.g., HP — and become more aware of Xerox’s products for the SMB space, Charles King, principal with Pund-IT, told the E-Commerce Times.
Indeed, as Xerox reported, Global sells document technology products from a variety of manufacturers, but currently no Xerox offerings. However, once the acquisition is complete, it will add the entire Xerox product range, including all Phaser and WorkCentre printers and multifunction systems that print, copy, fax and scan, as well as Xerox Nuvera and DocuColor digital presses. It will eventually sell Xerox services as well.
“The small and medium-sized business space is an area where Xerox has gotten hurt in the past, and it is a sweet spot for Canon and HP,” King said.
Execution Is Key
Much will depend on Xerox’s implementation of the deal. It is of a different caliber than earlier acquisitions, King said, which focused on building out services around a specific product set and thus required little integration or restructuring.
For example, in July 2006, Xerox closed on the $175 million cash acquisition of Amici, a provider of electronic discovery services that support litigation and regulatory compliance.
Xerox acquired XMPie for $54 million in November of last year — a provider of software for personalized, multimedia marketing campaigns.
By contrast, Global Imaging is a go-to-market acquisition that is aimed at the mid-market.
The acquisition is expected to close in May.