Photocopy Cats

Relatively cool on the heels of UPS' purchase of Mail Boxes Etc., Fedex announced yesterday that it will buy Kinko's for $2.4 billion. While FedEx was already the exclusive shipper to about 1,200 Kinko's locations, some analysts speculate that the buy is defensive — UPS bought Mail Boxes Etc. two years ago and currently operates about 4,500 stores.

While most of today's coverage considers the purchase's payoff for buyout firm Clayton Dubilier & Rice, which acquired a minority stake in Kinko's in 1997, I think the real story here is one of branding and expansion. I can think of few brands held in such high esteem — and with such obvious parallels. The deal just makes sense. And even though Kinko's planned IPO soured in the late '90s — and the company's retail locations are fewer than the UPS Store chain by two-thirds — plans for more locations are underway.

Seems like a good start to 2004. What do you think of FedEx/Kinko's chances for success in the light of UPS/Mail Boxes etc.? What companies do you resonate with — and work with — the most? Take the Fast Company poll.

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  • Don Johnson

    FedEx is buying a company that it has worked with for 15 years, and the buyer has consumated four previous deals successfully, according to press reports.

    Can FedEx make this deal work?

    Yes, it adds almost 1,200 stores where customers can drop off packages, and, perhaps, have some copying done at the same time.

    Perhaps, it will use Kinkos to expand into the digital document business, but who needs Kinkos for that?

    Doubtful that FedEx will be comfortable with the printing business, which is a job shop, customized business, not the standardized, highly automated shipping business.

    Key questions are:

    1. Will FedEx retain top Kinkos managers and let them run the business or try to provide "consulting" and centralize certain functions? What's its track record on this score?
    2. How much overlap is there betwen existing FedEx offices and Kinkos shops; how many redundancies will be eliminated?
    3. Will FedEx counters really draw more printing customers to Kinkos?
    4. Will the FedEx delivery service somehow be used to deliver to Kinkos' customers?
    5. FedEx is borrowing all but $750 million of the $2.5 billion purchase price; will it have the cash flow, capital and borrowing power to expand Kinkos or its core businesses?
    6. Will UPS expand its UPS stores to compete with Kinkos?
    7. How can UPS counter the FedEx purchase of Kinkos, or does it need to?
    8. Kinkos is a marginally profitable business; with the new overhead (depreciation, corporate, etc.), will FedEx be able to increase its profitability?
    9. Will Kinkos' pricing power be helped or hurt? FedEx's?