In the competitive business landscape, brand acquisitions are a common strategic move, particularly in industries facing rapid change or consolidation. The recent announcement of Xerox acquiring Lexmark exemplifies such a strategy.
This article explores why companies acquire other brands, the benefits they aim to achieve, and how these advantages manifest in the context of Xerox and Lexmark.
Benefits of Brand Acquisition
1. Access to new markets
One of the primary reasons companies pursue acquisitions is to expand their market reach. In the case of Xerox and Lexmark, both companies operate in 170 countries, but their combined strengths create opportunities to further penetrate global markets.
Lexmark’s established presence in Asia-Pacific provides Xerox with a stronger foothold in the region, where demand for hybrid work solutions is rising. By combining resources, the two brands can better cater to the needs of American businesses adapting to hybrid work environments.
Through acquisitions, brands gain access to customer bases, distribution networks, and market knowledge that would otherwise take years to develop organically.
2. Complementary strengths
Acquisitions often bring together companies with complementary skills, products, or technologies, creating synergies that enhance their combined offerings.
Lexmark’s expertise in A4 color printing aligns well with Xerox’s advanced ConnectKey technology, allowing them to explore the A3 market more effectively. Moreover, Lexmark’s strong Original Equipment Manufacturer (OEM) production capabilities enhance Xerox’s product portfolio and manufacturing efficiencies.
The combination of their strengths enables the two companies to deliver innovative, comprehensive printing and digital services to meet evolving customer demands.
3. Cost efficiencies and synergies
Acquisitions are often driven by the potential for cost savings and operational efficiencies. In the Xerox-Lexmark case, projected savings of $200 million and a reduction in debt are significant drivers of the deal.
The integration of operations may streamline production, reduce redundancies, and optimize supply chains. The deal is structured to address financial challenges, ensuring both companies are better positioned for long-term stability.
These cost efficiencies allow companies to reinvest in innovation, marketing, or expansion strategies.
4. Strengthening competitive position
In industries with intense competition, acquiring another brand can help a company consolidate its position and protect market share. The printing industry is no exception, with players like Fujifilm and Canon closely monitoring Xerox’s moves.
Combining forces positions Xerox and Lexmark among the top five global print solutions companies. They are better equipped to compete against industry giants in an increasingly consolidated market.
Consolidation is particularly valuable in mature industries where organic growth opportunities are limited.
5. Diversification of offerings
Acquisitions often allow companies to diversify their product or service portfolios, making them more resilient to market changes.
Lexmark’s A4 solutions complement Xerox’s strengths, enabling the combined entity to cater to a wider variety of customer needs. The acquisition also supports the growth of digital services, which are critical in the era of hybrid work environments.
Diversification reduces dependency on specific markets or products, safeguarding companies against economic fluctuations or technological disruptions.
6. Overcoming internal limitations
For some brands, acquisitions serve as a way to address internal challenges or weaknesses. Xerox, for instance, has faced criticism for abandoning key segments like inkjet production. Acquiring Lexmark provides an opportunity to reorient and revitalize its strategic approach.
The acquisition allows Xerox to refocus on high-growth areas like hybrid work solutions and digital services. Lexmark’s capabilities in OEM production and A4 solutions complement Xerox’s document management expertise, addressing gaps in their offerings.
7. Accelerating growth
Organic growth can be slow and uncertain, especially in industries undergoing rapid change. Acquisitions provide a faster route to achieving strategic goals.
The acquisition instantly enhances Xerox’s market position, technological capabilities, and global reach. Becoming one of the top five print solutions companies bolsters their credibility and influence in the industry.
Acquisitions allow companies to achieve scale and scope more quickly than organic growth would permit.
Challenges and Risks
While the benefits of acquisitions are compelling, they are not without challenges. The Xerox-Lexmark deal faces several potential risks:
1. Regulatory approval
Regulatory approval represents one of the most significant hurdles in the Xerox-Lexmark acquisition. Both companies operate in a highly competitive and consolidated industry, and regulators are likely to scrutinize the deal to ensure it does not create an unfair advantage or monopolistic practices.
Authorities will assess the impact on competition in various regions, particularly in the Asia-Pacific and U.S. markets, where the merged entity could gain substantial influence. Additionally, the deal requires approval from Ninestar’s shareholders, who may have differing priorities or expectations.
Any delays in securing regulatory or shareholder consent could disrupt the timeline, increase costs, and potentially lead to the imposition of restrictions that alter the terms or scope of the merger.
2. Integration issues
Successfully integrating two established organizations like Xerox and Lexmark presents a complex challenge. Differences in corporate culture, operational processes, and technology systems must be harmonized to achieve the projected $200 million in cost savings.
For example, Xerox’s ConnectKey technology and Lexmark’s OEM expertise must be seamlessly integrated to deliver the promised product synergies. However, mismatched expectations, resistance to change from employees, and logistical hurdles could slow the process, reducing the immediate benefits of the acquisition.
Without careful planning and execution, integration missteps could lead to inefficiencies, employee turnover, or customer dissatisfaction.
3. Strategic uncertainty
Xerox’s overarching strategic direction has been called into question, particularly following its decision to exit the promising inkjet production segment. While the acquisition of Lexmark is aimed at revitalizing its position in the printing solutions market, critics argue that Xerox needs a clearer long-term strategy to remain competitive in a rapidly evolving industry.
The focus on hybrid work solutions and digital services is promising, but stakeholders will expect a detailed roadmap for innovation, market leadership, and sustained growth. If Xerox cannot articulate and execute a cohesive strategy, the acquisition risks becoming a short-term fix rather than a transformative move for long-term success.
Addressing these challenges will be critical to ensuring the Xerox-Lexmark deal delivers its intended benefits and positions the combined entity as a leader in the global printing solutions market.
Conclusion
The Xerox-Lexmark acquisition highlights the strategic rationale behind brand acquisitions: expanding market reach, leveraging complementary strengths, achieving cost efficiencies, and strengthening competitive positions.
For Xerox, the deal offers a pathway to revitalization in a challenging industry. However, the success of this acquisition will depend on effective integration, the realization of projected synergies, and a clear articulation of its long-term strategic vision.
Acquisitions are powerful tools for growth, but their benefits are only realized through careful execution and a focus on delivering value to customers, employees, and stakeholders. The Xerox-Lexmark partnership has the potential to redefine the printing solutions market, but its ultimate impact remains to be seen.