EFI is reaffirming its stated strategy to be a consolidator in the business process automation software space supporting the graphic arts industry. On August 3rd, EFI announced the acquisition of Prism Group Holdings, adding yet another company to the mix. WhatTheyThink spoke with Marc Olin, GM of EFI's Software Applications business unit (APPS), to find out more about the rationale behind this acquisition.

WTT:  Marc, it sounds like the M&A group at EFI has been busy, PrintStream in February, Entrac Technologies in July, and now Prism. What was attractive about this latest acquisition for EFI?

MO:  First, it significantly increases our international presence.  Prism is the largest provider in Australia and New Zealand and also has a decent European and South African client base.  It aligns with our goal to expand both our international client base and international revenue within the APPS product lines.

WTT:  You determined that this expansion was better accomplished through acquisition?

MO:  While we have been steadily increasing our investment in our international expansion, acquisitions are the big accelerators of this strategy.  Organic growth can present sort of a Catch 22-if you are trying to penetrate a market, you need to have staff there, sales and customer support.  But you can't really put a large staff into a region without an existing customer base. This is our first major acquisition in the Asia Pacific region. By acquiring a company in that market, we now have the existing customers and a team in place to support them.  We have the existing implementation staff that can finish up with existing client work and also assist clients moving to our current products.  Prism's good client base was of a great deal of interest to us.

WTT:  In terms of size, how does Prism rank relative to other MIS companies still out there?

MO:  We believe them to be one of the few large MIS companies in the world outside of EFI. They have about 75 employees and clients in the hundreds.

WTT:  What are the retention plans relative to employees?

MO:  We will be keeping virtually all of the people that are involved in the customer facing activities, including the support and implementation staff and a significant portion of the development staff.  Those we are not retaining for Prism, we are looking to move into other product areas within EFI so that we can bring the best ideas from Prism Win and QTMS, the shop floor data collection system, into our products. The feedback we got from the Prism employees regarding being part of EFI and their future role was largely positive

WTT:  What will Filip's role be in the combined organization?

MO:  Filip is currently overseeing the group for us.  That is a transitional role for him. We hope to retain him in a new role inside of EFI not related to Prism. The Prism group will report up to Bob Rothschild who runs our Heritage group, for the legacy products that we no longer sell but actively support.

WTT:  EFI did not disclose the financial details of this transaction, saying it was not expected to be material to EFI's 2011 results. Will the next 10Q disclose some of those details?

MO:  Yes. We can't disclose at this point but it will be disclosed in the future as part of our quarterly financial filings. But regardless of the financial details, it is clear to us that if we don't take care of the Prism customers, we will not see any positive return on this deal.

WTT:  What are the plans relative to ongoing development of Prism Win and QTMS products?

MO:  We will not be selling these products to new clients.  If existing clients need additional licenses and modules, we will make those available. Likewise, if existing clients want to expand the use of QTMS software/hardware modules and add material or pallet tracking, we will continue to sell these add-ons.  And we will continue to support Win and QTMS for the foreseeable future. We will continue development, although at a somewhat slower pace, with guidance from existing customers as to what is most important to them to help prioritize the development effort. We are very interested in making sure customers' needs are addressed, and we will honor all obligations of any agreements signed by Prism with its clients in the past. For QTMS, we are planning to join that team together with our Auto-Count team and ensure that customers of both product lines have the best shop floor data collection system in the market.  The engineers from both teams will work together to ensure a seamless transition to future releases of both products and QTMS clients will not be charged, provided they are current on maintenance, for a transition to our future shop floor data collection product releases.  Additionally, there should be no worry on the part of the clients. If they wish to still deploy Prism Win or QTMS, we will make that happen.

WTT:  How much impact does this have on the North American market?

MO:  Prism has a few strategic clients here in North America; however, it was their smallest geographic market served.  As I mentioned previously, the existing clients will still receive support and can continue their implementations if they wish.

WTT:  I suppose there will now be a Prism track at Connect?

MO:  Absolutely there will.  We have content at Connect for all our customers including those on our legacy products.  Additionally, we are going ahead with the Prism users' group meeting that was already planned for the UK in September. We will be bringing Radius users into that meeting as well. Our hope is that platform will ultimately be the base for a European Connect at some time in the future.  But we will, of course, look to bring as many international customers to Connect next April. We will do our best to make it worth the trip.

WTT:  Where does this acquisition position EFI in terms of market share globally?

MO:  We think we have about 70% market share in the U.S. in print MIS and business automation software for the graphic arts.  I believe that with this acquisition, we are now the largest provider in Australia and New Zealand and we are one of the largest providers in Europe. With continued investments and perhaps more acquisitions, my goal is that next year, we will be the largest provider in Europe. This is of course in addition to the leading market share of our Fiery front-end and our Vutek and Jetrion printers.