Zebra Technology Earns Its Stripes With Huge Merger

Zebra Technologies’ acquisition of Motorola Solutions’ Enterprise business—its largest acquisition to date—elevates the company to a new playing field

Zebra Technologies has embraced its share of sizable acquisitions over the past two decades. From Eltron International in 1998 and the mobile printers of Comtec Information Systems in 2000, to LaserBand in 2012 and the cloud-based inventory management of Hart Systems in 2013, suburban Chicago-based Zebra has grown and diversified its portfolio of printers, printing technology, and location and sensing solutions to the point where 90 percent of Fortune 500 companies now use the company’s products and services.

But put the Enterprise business of Motorola Solutions into the mix, an acquisition that will be finalized in early 2015, and Zebra will grow into an entity with more than three times the previous year’s revenue—a fact that senior vice president and general counsel Jim Kaput doesn’t take lightly. Nonetheless, he sees the Enterprise business as the quintessential fit for Zebra. “Our products are complementary,” Kaput says. “The [Enterprise business] captures and enters data through portable and hands-free scanners and through mobile computers, and then we print it. So we’re often part of the same solution. We all work together.”

In fact, the two companies have worked together the past couple of decades. Motorola, another company with deep Chicago roots, became a pioneer of cell phone and pager technology in the 1980s and 1990s; it entered the enterprise mobility solutions business in a significant way, notes Kaput, when it acquired Symbol Technologies in 2007. And although Motorola proper was no more as of January 2011, Motorola Solutions continued as its legal successor until Zebra made the move to acquire it. “It makes a lot of sense,” Kaput says of the acquisition. “For example, the acquisition offers a lot more potential one-stop shopping for a CIO of a retail, manufacturing, transportation and logistics, or a health-care company. Those are big vertical markets that we’re in, and we can clearly make it more efficient for our customers.”

Talks between Zebra Technologies and Motorola Solutions began in 2013, with agreements to buy reached in April 2014. Next came working through the process of carving out the Enterprise business from Motorola in order to continue doing tasks that can’t be done by Zebra until the proper systems are created. These are tasks like making payroll, providing benefits, and processing orders in many of the countries—more than four dozen—involved in the transaction. Meanwhile, Motorola Solutions has a similar situation among the employees who will remain with the ongoing Government and Public Safety business of Motorola, with different system issues cropping up across more than fifty different jurisdictions. “The US is easiest in the sense of it being one country with most of the employees, but the other 55 percent of the business that we’re buying is in fifty-four other countries,” Kaput explains. 

Hold-ups on the international front have been relatively few for Zebra; Spain and Poland were the last two countries to give competition approvals for the acquisition, with all regulatory approvals coming in time for the acquisition to be completed by the end of 2014. As it turns out, Zebra’s already global business means the distribution (by percentage of sales) of global sales aren’t expected to change much more than a few percent, post-acquisition, across Zebra’s four business regions.

Another difference that is more likely to be felt in Zebra’s business today is the increased number of managed, professional, and repair services provided—“Services are more of what [the Enterprise business] does than what we do,” explains Kaput—and a greater presence in the countries in which Zebra was already doing business. In its most basic form, though, the carve out from Motorola of the Enterprise business is something that typically takes more than twice as long to complete as Zebra and Motorola are planning. “It’s very challenging for both sides to get it done,” Kaput admits. “If we can’t take an order, ship an order, and bill an order, then it’s a business that can’t run yet. So that’s what both we and Motorola are focused on.”

“If we’re hiring over 4,500 new employees around the globe, it can’t be done centrally. It has to be done by the entire company. That’s been our challenge here.”

The acquisition itself is a fairly straightforward event in many respects, save for one crucial factor: the acquiree is larger than its acquirer. So much, in fact, that Zebra will be more than three times the size it was in 2013. That translates into 2,000 new employees in the United States alone; it also means annual revenue totals near the $3.5 billion mark, making Zebra “not just a piece of the enterprise asset intelligence market anymore, but a much bigger part of it” with its complementary offerings and solutions, says Kaput. He reiterates the familiarity between Zebra and the Enterprise business as the key to Zebra getting its figurative legs beneath the new size: “We know [Motorola and the Enterprise business] well, worked with them a long time, have much of the same organizational structure, customers, distributors, and reseller networks. It’s really more about the magnitude of it. As said at [Zebra’s internal] town hall meeting, it’s our challenge to understand.”

It’s a challenge the company is certainly embracing, as the worldwide business need to efficiently capture and use data remains strong. But while growth management and the art of staying competitive are high on Zebra’s general, post-acquisition to-do list, Kaput has more specific things in mind for the legal team. “The goal was to create a legal department of senior partners,” he says of the original Zebra plan. “We’ve now been there, done that, seen it before, and can figure out how to get it done—but frankly, there’s not a lot of room to teach along the way. With more than fifty people in the new legal department, we will have a much broader set of lawyers and support people in the legal function, allowing us to be less of generalists.”

In Kaput’s case, that means a sharper focus on intellectual property and global trade compliance—the latter of which came with its own set of post-acquisition wrinkles. “We haven’t performed services as much as the Enterprise business … so there are a few more jurisdictions and issues involved when we consider how and where to ship product for service repairs, for example,” he says. “We have to make sure we have the right staffing, controls, and processes in place to make sure that we stay compliant.”

And of course, Zebra’s legal department is only part of both companies’ worldwide efforts towards the best of transitions. “If we’re hiring over 4,500 new employees around the globe, it can’t be done centrally,” Kaput says. “It has to be done by the entire company. That’s been our challenge here.”