• Will look for more tuck-ins in 2025 following two large deals
• Targets should have at least USD 25m in annual revenue
• Large deals will be back in the mix in 2026

Xerox [NASDAQ:XRX], an office and production print technology company, will use M&A to strengthen its legacy business and grow its digital and IT services, said President and COO John Bruno.

Coming off two large deals announced in 4Q24, the company will be looking at smaller deals in 2025 for targets with at least USD 25m in annual revenue for capabilities that complement organic initiatives, Bruno said.

During that time, Xerox will be “digesting” the USD 400m acquisition of product and service provider ITSavvy completed in December and its USD 1.5bn transaction for China-based print manufacturer Lexmark International, which it hopes to close in 3Q, he said.

A managed serviced provider that adds to its expanding IT services business at USD 100m-USD 125m in revenue would be “a nice fit” for Xerox as it absorbs ITSavvy and Lexmark, the COO said.

Xerox will look to add digitization businesses, client engagement and process automation capabilities regionally throughout its main footprint in North America and Europe, Bruno said.

The company believes there are good opportunities for M&A in Mexico and Brazil for digital services, he said.

“The types of things we’ll look at will be tuck-ins that bring capabilities that enhance the local market,” Bruno said.

Some local print-related opportunities should open up in Asia with the addition of Lexmark, which has a strong presence there, he said.

Geography is less important for IT services, which by nature has more reach with an asset like a help desk, Bruno said.

Xerox prefers acquiring companies with adjacencies to its services that provide a strong team and that drive profitability and long-term, sustainable growth, he said.

The firm believes it is a good home for an entrepreneur or small company looking to accelerate expansion with the distribution and scale that Xerox would provide, Bruno said.

The print giant wants to work down debt, so deals for targets should not be dilutive, he said, adding that firms with multiples in the mid-teens would be preferable.

Xerox anticipates getting back into the market for larger deals like the one for Lexmark by 2026, Bruno said.

The company is on a reinvention journey to make digital services and managed IT services for small and medium-sized businesses a larger portion of its revenue. IT services has more than 10x the addressable market as print, Bruno noted.

The ITSavvy deal doubled IT services revenue to about USD 800m, which is greater than 10% of company revenue excluding the addition of Lexmark, he said.

Xerox reported fiscal year 2024 revenue of USD 6.22bn, a decrease from USD 6.89bn in 2023. The company had adjusted net income of USD 135m, or USD 0.97 per share, down from USD 287m or USD 1.82 per share in 2023.

The company’s market cap as of the close of trading on 21 February was USD 981.79m.

Willkie Farr & Gallagher and Ropes & Gray acted as legal advisors to Xerox for the Lexmark deal. Jefferies was financial advisor.