Office Depot Pivots Toward Services Model with $1 Billion CompuCom Acquisition

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Office Depot Pivots Toward Services Model with $1 Billion CompuCom Acquisition

10/09/2017

Office Depot is pivoting from a traditional office products retailer to a broader business services and technology products platform. As the first step in this new strategic direction, the company has agreed to acquire CompuCom Systems for $1 billion.

CompuCom provides managed IT services to businesses with over 5.1 million unique end users. CompuCom’s team of approximately 6,000 licensed technicians is the largest employee field technician workforce in North America, providing remote and onsite technology support. CompuCom procures, installs and manages the lifecycle of hardware and software for businesses, and offers IT support services including remote help desk, data centers and on-site IT professionals.

“Technology is the office supply of the future,” said Gerry Smith, chief executive officer, Office Depot. “[The acquisition] marks a significant milestone as we move to provide a unique business services platform for our current and future customers. Acquiring CompuCom is the first step in this new strategic direction. The combination of CompuCom’s enterprise IT services with our millions of customers and approximately 1,400 distribution points gives us the credibility and scale to build a sustainable platform and stand apart from the competition.”

The combination of the two companies represents a unique opportunity to bring IT support services to Office Depot’s customers, particularly underserved small- and medium-sized businesses (SMBs).

“Together with Office Depot we can create a distinctive offering for our enterprise and SMB customers and accelerate our growth,” said Dan Stone, chief executive officer, CompuCom. “The workplace has truly moved to a digital environment with the average worker having over four connected devices. Office Depot’s established brand and large national footprint will help to drive the expansion of our offerings to more markets and build on our client-focused success to welcome new customers seeking high-quality technology services and solutions.”

A few highlights of the deal include:

  • $25 billion opportunity. Office Depot and CompuCom will be positioned to capture market share in a $25 billion, highly fragmented market by providing a nationwide, comprehensive network of enterprise-level tech services and products.
  • Targeted small and medium business model. The combined company will serve SMB customers by providing end-to-end IT services through its approximately 6,000 salaried, certified technicians nationwide and top-tier cloud and data centers. This model will fit within Office Depot’s omnichannel platform, particularly its last-mile footprint that offers access to nearly six million SMBs within three miles of its approximately 1,400 stores.
  • Increased traffic and services revenue. CompuCom’s established SMB offering, Tech-Zone, will be placed within Office Depot’s nationwide retail footprint, providing immediate scale and driving traffic into Office Depot stores.
  • Cross-selling opportunity. Both Office Depot and CompuCom sales teams can capitalize on minimal customer overlap to cross sell a full suite of products and services.
  • Focus on core enterprise business. CompuCom will be the technology services platform for Office Depot, expanding CompuCom’s reach and enabling further efficiency initiatives in its core enterprise business focused on automation and innovation.
  • Financial ramifications. The acquisition adds approximately $1.1 billion of revenue to Office Depot’s top line and expected cost synergies of over $40 million within two years.