| Copying Success |
5 January 2004
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FedEx Buys Kinko's
Federal Express, the overnight courier service, has announced that it will buy Kinko's, the all-night copy shop, for around $2.4 billion. If the merger and acquisition business is ever to get back on its feet, it needs more deals like this.
FedEx will get Kinko's 1,200 retail stores (about 8% are outside the US). In effect, these will be the equivalent of a post office feeding FedEx. This isn't predictive genius at work. Kinko's has been an exclusive FedEx shipper for 15 years and some 134 Kinko's are already FedEx post offices. The plan is simply to expand this. The fact that Kinko's $2 billion in annual revenue will now be part of FedEx' revenue is an added bonus, all the more so since FedEx missed market expectations in its fiscal second quarter.
Unlike mergers in the 1990s that saw companies buy one another out for their income streams and potential stock windfalls, this deal makes business sense. A consumer who needs copies made often needs to send those copies somewhere, and often in a hurry. It's one-stop shopping. Moreover, the success of the UPS purchase of Mail Boxes Etc. (competitors of FedEx and Kinko's respectively) proves that this is not uncharted territory.
If the deal doesn't work out, it will be because of bad management, unforeseen economic developments or sudden changes in consumer tastes. On the face of it, this deal works. The M&A wizards on Wall Street should use it as their model for the next few years. No bets as to whether they do.
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