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DELUXE CORPORATION
BELINDA JONES
VASAUGH ARCHER
ILONA KORSOFF
CASE 35
INTRODUCTION
Deluxe Corporation
- The largest printer of paper checks in the U.S.
- $1.6 billion company with locations in the United States, Canada and Ireland
- They have 4.5 million active small business customers and over 5,100 financial institution clients
INTRODUCTION
HISTORY
- Founded in 1915 by W.R. Hotchkiss with a $300 loan
- 1965 Deluxe becomes publicly traded company
- From 1975 to 1995 its' sales increased at a compound annual rate of 12%
- In late 1990's revenues started declining due to the industry change
--> Restructuring phase
- In 2008, Deluxe begins acquiring digital-savvy companies such as Hostopia, Aplus.net and VerticalResponse
INDUSTRY
- Deluxe competed primarily with two other companies
- John Harland
- Clarke American
- In late 1990's, new forms of payments encroached on the demand of the industry and demand for printed checks falls 1% to 3% annually
- Credit/debit cards
- Internet bill-paying systems
Current demand
CURRENT DEMAND
- Sales and Growth on decline
- Use of online payments and credit/debit cards constantly increasing
- Must restructure company in order to remain sustainable
Current financial performance
Adjustments
- Company dropped from 62 total printing plants to just 13
- Reduced total labor force from 15,000 to just 7,000
- Outsourced information technology systems, improved manufacturing efficiencies
CURRENT FINANCE PERFORMANCE
Stratetic idea shifting
- Implementation of eFunds and iDLX Technology Partners
- eFunds provides electronic-payment products and services
- iDLX offers technology related consulting services to financial service companies.
STRATETIC IDEAS
Back to the basics
- The executive believed that Deluxe offered the greatest value to shareholders being a pure-play company.
- Decided to focus on three primary business units:
1. Direct checks
2. Financial Services
3. The Business Service segment
BACK TO THE BASICS
Markets response
MARKETS RESPONSE
- In the year 2001 Stocks firm grew greater than 65%
- Corporations rate of sales growth was 4%
- Deluxe’s 2001 P/E ratio of 11.0X
WACC & STOCK PRICE VALUE
FLEXIBILITY
CONCLUSION & FINALIZING STATEMENTS
- Bond rate to BBB
--> help to leverage the company and reduce financial stress of repurchasing shares, reduce WACC
--> A better rating is always desired, but with a matured market and repurchasing shares, lowering the rate would help the current situation
Video Clip
Just as one of Singh's mentors stated ''If you wait until you have a 99% solution, you'll never act; go with an 80% solution''
REFERENCES
Deluxe Enterprise Operation. (2017) History. Retrieved November 26, 2017 from https://www.deluxe.com/about-deluxe/history
Bruner & Eades & Schill. (2014) Case Studies in Finance -managing for corporate value creation 7th edition (pp. 479-496)