Global Imaging Systems, Inc.
Global Imaging Systems, Inc.
Sales: $926.5 million (2005)
Stock Exchanges: NASDAQ
Ticker Symbol: GISX
NAIC: 432420 Office Equipment Merchant Wholesalers
Global Imaging Systems, Inc. is the leading provider of many office technology solutions. These include solutions for digital automated office equipment, network integration, and electronic presentation systems. In addition, Global offers a variety of contract services, such as service to machinery, supply, network management, technical support, and training. Global is the most profitable public company among its peers and is committed to consolidating the fragmented office technology solutions industry.
An Idea Coming to Life: 1994–2000
Tom Johnson had a gift for acquiring and turning around underperforming companies. In fact, after his graduation from the University of Florida in 1972, with him in various leadership roles, the revenues of several companies grew. He became widely recognized throughout the office equipment industry for creating the benchmarking model for acquiring and integrating businesses. Finally in 1994, 20 years of experience in acquisitions and integrations, along with smart thinking and the ability to predict market and business trends, had brought him to a milestone. It was time to turn his "ideas into reality." Johnson, through a partnership with a private equity investment firm called Golder, Thoma, Cressey, Rauner Inc. (GTCR), founded Global Imaging Systems, Inc. Johnson, a Harvard Business School graduate, brought to the company not only his benchmark model but ten years of experience examining the office equipment industry through the eyes of his competitors. According to Global's web site, the company was formed "to exploit profitably Tom Johnson's benchmarking model, known throughout the office imaging industry as the premier tool for improving operations and for evaluating potential acquisition candidates."
Johnson created a company with a philosophy of "Think Globally, Act Locally." This meant that Global would be in the business of acquiring core companies that would offer its products and services regionally. In addition, satellite companies would act under the core companies and would be able to offer products and services even more locally, with the core company performing most administrative duties. Acquired companies would keep their original names and management, thereby retaining pre-acquisition customer relationships. While devising this system of companies, Johnson also had the foresight to recognize market trends. According to Document Imaging Report, he "realized that, in the future, stand-alone, analog copiers were going to give way to networked digital copiers." He decided to make Global a "one-stop shop," and offer not only a range of digital imaging solutions, but also network integration and management services, along with electronic presentation systems (including online audio/visual presentations). Johnson also recognized a need for office equipment solutions by customers in the middle market and decided that Global would focus on those clients.
In June 1998, Global Imaging Systems held an initial public offering (IPO), with GTCR owning close to 40 percent of the company. The earnings generated by the IPO would be used for general corporate use and to repay debt. By the fall of that same year, Global Imaging Systems had acquired 27 companies and finally turned a profit for the first time. It had ten core companies in different regions of the country, with the goal being that each core would be able to offer all of Global's products and services. Johnson stated that he would like to have 25 core companies covering the entire United States, but admitted that it could be up to five years before enough companies were acquired and integrated in order to reach this goal.
In March 1999, Global announced that it had acquired Dahill Industries, bringing its total number of acquisitions to 32. With Dahill generating approximately $23 million in annual revenue, Global's acquired revenues rose to $110 million for the fiscal year. Dahill, an Austin, Texas company, was acquired to become a core company for Global's eastern Texas market. In addition, it would oversee satellite companies within the market. This acquisition would become a fairy-tale example of the success of Global's decentralized business model by, three years later, winning the company's award for outstanding performance as measured by revenue growth, operating income growth, and the growth in cash flow, return on assets, and return on investment.
Taking Off: 2001–02
By 2001, Global had acquired 50 companies, but was dealing with the aftermath of four straight quarters of earnings declines. It also was dealing with market value plunges, reportedly because it was simply being lumped together with larger industry leaders in the eyes of investors. While large industry leaders were being stymied by financial problems and internal issues, however, Global was steadily moving forward. Choosing to provide products and services to middle-market companies had been a genius move. Large industry leaders, such as Xerox Corp. and IKON Office Solutions, chose to battle over major business accounts, leaving relatively no competition for Global in the middle market. In 2001, that middle ground made up 45 percent of the entire market. "Global's largest target customer might have $1 billion in sales and a couple thousand employees. But most are far smaller. These companies look for copiers primarily in the $7,000 to $15,000 range," stated Investor's Business Daily. Global also offered convenience just by virtue of being a "one-stop shop." Not only did the company offer service contracts on the products it was providing, but it also offered several brands through Global's relationship with multiple vendors. Although the large industry leaders were hitting upon troubled times, Global was experiencing a 90 percent customer retention rate.
Compared with others in the industry, Global's future looked promising. But the company decided to continue operations on a cautious note. Instead of borrowing in order to purchase new businesses, it would use internal cash flow and would be more selective about new acquisitions. Although it seemed to have a strong foothold in the industry, the company was still heavily leveraged, with the debt-to-equity ratio being almost 70 percent, according to a July 2001 Investor's Business Daily article.
Global's cautiousness was rewarded in early 2002 when it was able to announce record-high revenues for the third quarter (ending December 31, 2001). Tom Johnson said, "Our employees came through again and delivered an outstanding quarterly performance, in spite of the ongoing economic uncertainty." Also in 2002, Global announced that it would commence a public offering in an attempt to raise money to repay indebtedness. The offering would yield net proceeds of $39.2 million. Following the public offering, Global was able to make its 53rd acquisition. Johnson commented that the company hoped to return to a more normal pattern of external growth. This pattern would involve possibly acquiring several more businesses within the year, economic conditions permitting. In May 2002, Global was able to announce record-high earnings once again. This time the records were set not only for the quarter, but also for the fiscal year, ending March 31, 2002. After making it through the initial rough patch at its inception, Global seemed to be on the fast track to success.
In the spring of 2002, Tom Johnson brought his managers and top sales and service associates together in order to unveil a new theme. With his company long following the motto "Think Globally, Act Locally," Johnson had decided to add a new idea. The new motto was to be "Passionate about Customer Productivity," and was an initiative that would exemplify Global's commitment to the customer and to their ever-changing needs. According to PR Newswire, Johnson said, "Passionate about Customer Productivity says it all. It's who we are, and why we do what we do. This is not just lip service, or a catchy phrase." Johnson explained that being especially conscious of the needs of clients, along with Global's decentralized model of core companies and satellite companies served to truly set the company apart from competitors. It was these unique qualities that would push Global forward to continue to outperform other companies in the industry.
Strong Performances: 2003–05
Defying expectations, Global was able to once again announce record-high fiscal year revenues and net income (for the fiscal year ending March 31, 2003). The success was attributed to the company's steadfast commitment to customers in the middle market and also to Global's decentralized business model. Global also announced that it would be refinancing existing debt at a much lower interest rate. Although the refinancing involved a $5.4 million prepayment penalty, Johnson stated that he expected low interest rates to offset the penalty.
Approximately one month later, Global announced that it had acquired the Dallas, Texas branch of Copy Products, Inc., bringing its total number of acquisitions since 1994 to 60. Copy Products was a leading digital copier dealer in the Dallas area and would expand Global's coverage there. With annual revenues of approximately $3.4 million, Copy Products would become a satellite operation of core company Dahill Industries.
Global's strategic mission is to be the most efficient, lowcost provider of document and image processing technology and services, including input, storage and output. We are "Passionate about Customer Productivity."
Also in 2003, Johnson, president and chief executive officer of the company, was elected chairman of the board of directors, following the resignation of Carl Thoma. Carl Thoma, who held the position for nine years, was the managing partner of Thoma Cressey Equity Partners, a private equity investment company and a successor to GTCR. Johnson's election was a logical one, following his tenure as president of the company since its founding.
The spring of 2004 brought the acquisition of Imagine Technology Group, Inc., the company's largest acquisition to date. Imagine reported annual revenues of approximately $117 million for 2003 and served the office technology needs of middle-market customers in 22 locations across the western United States. Chairman and CEO Johnson said, "This transaction puts Global ahead of schedule to meet our three-year acquisition growth target, and we believe the acquisition will be nicely accretive to our earnings."
Global also reported in 2004 that it had reached an 18 percent increase in revenues, bringing its revenues to a record $212 million for the first quarter. Attaining the record brought the company even closer to Johnson's goal of becoming a $1 billion company. Johnson said, "We are running ahead of our external-growth goal to acquire, on average, $60 to $100 million in annualized revenues each year for the three-year period ending March 2006."
Once again, Global was able to announce record-high revenues and net income, this time for the fiscal year ending March 31, 2005. Compared with the previous year, revenues were up 23 percent and operating income was up 24 percent.
Global's 2006 fiscal year started strong with the acquisition of Scottsboro Business Equipment. The business reported annual revenue of approximately $1.7 million and would act as a satellite company within the Alabama and southeast Tennessee markets.
Tom Johnson told the Business Journal (Tampa Bay) that one person he would have liked to have met would be Alexander the Great. Johnson said, "The most impressive thing about him was his ability to win over those whom he conquered." As well as appreciating this ability to build a rapport, it appeared as though Johnson had tried to model this trait. As chairman and CEO of the company, he had led Global into its 11th year, forging a relationship with numerous vendors and partners, while continuing to acquire and integrate new companies. In a relatively short amount of time, Global had become a shining example of how to think "outside of the box."
Canon Inc.; CDW Computer Centers, Inc.; Danka; Dell Computer Corporation; Gateway, Inc.; Hewlett-Packard Company; IKON Office Solutions, Inc.; Imagistics; Insight Enterprises, Inc.; Konica Corporation; Minolta Co., Ltd.; PC Connection, Inc.; Xerox Corporation.
- Global Imaging Systems, Inc. is founded according to a benchmarking model.
- Global Imaging Systems, Inc. holds its initial public offering.
- Global outshines competition in rough economic times.
- A new motto is unveiled.
- The largest acquisition to date is made.
- Global announces record-high revenues and net income.
Crugal, Robin M., "Tampa, Florida Office Equipment Firm Doesn't Copy the Rest," Investor's Business Daily, July 25, 2001, p. A08.
"Integrating Copier Dealers and Imaging Integrators," Document Imaging Report, October 16, 1998, p. 4.
"Tampa, Fla.-Based Global Imaging Systems Sets $212 Million Revenue Record," Tampa Tribune, July 23, 2004.