Deluxe Corporation

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Section 1: DELUXE Corporation     1.1. 1.2. 1.3. 1.4. Company Business Overview Macro-Evironment & Industry SWOT Analysis Porter's Five Forces

Section 2: Business & Strategy Risks / Financing Requirements Section 3: Main Objectives of the Financial Policy Section 4: Financial Flexibility – Cost of Capital

Section 5: Is Deluxe’s Current Debt Level Appropriate ?

Section 6: FRICTO Analysis

Section 7: Conclusion - Recommendations


Section 1: DELUXE Corporation 1.1. Company Business Overview Deluxe Corporation (NYSE: DLX) is one of the two largest check printers in the United States, and provides various personalized products and services to small businesses, financial institutions, and consumers. Some of the services available from Deluxe Corp are design services, website services, print marketing, promotional products, and fraud protection services. Deluxe and its subsidiary brands including New England Business Services Inc. (NEBS), McBee (formerly Royal McBee) and Checks Unlimited are organized into three business segments:   

Deluxe Financial Services-serving banks and credit unions Deluxe Small Business Services-serving small businesses Direct Checks-producing and delivering checks directly to consumers

Deluxe is based in Shoreview, Minnesota and has 33 facilities in the U.S. and 3 locations in Canada to conduct its printing and fulfillment, call center, and administrative functions. In addition, the company sells personalized checks, accessories, stored value gift cards and other services directly to consumers. The company uses North American sales forces for direct marketing, independent distributors, financial referrals and internet to offer its products and services. The company caters small businesses and financial institutions to better operate, protect and grow their businesses.

1.2. Macro-Environment & Industry
 The check printing industry is highly concentrated & competitive market  Three main actors concentrate more than 90% of the market : Deluxe ~ 49%, Clarke American ~ 26% & John Harland ~ 25%  The industry is in the maturity phase and sales started to decline during the last 2 years: the check printing business faced an annual decline of 1-3% in check demand  The market also knows a rough competition of substitute products as the on-line payments & the credit cards which are the effect of technological changes  The Industry lost shares to electronic forms of payments, such as ATMs, credit cards, debit cards, and Internet bill-paying systems  Deluxe Corp. is pursuing currently a very risky strategy by focusing on core business and spinning-off technology related subsidiaries (eFunds and iDLX Technology Partners). So, the firm lost the diversification of its products & the fact of being present in a sector which could replace the check printing industry


1.3. SWOT Analysis
- Dominant actor (leadership) in highly concentrated and competitive industry - Resources well optimized and rationalizated - Ability to generate revenues & profits on core business - Expanding operating margin - Financial strength (good rating) - Strong & experienced management team

- Focus on core business Vs No diversification - Lost diversification by spinning-off two strategic compagnies (eFunds and IDLX Technology Partners)

- Good and strong business with high level of profitability - Opportunity in the business segmentation through cross-selling variety of products & diversification - Possibility of partnership with regional firms

- Merciless wave of technological change
- Advent of the electronic form of payments: online payments & credit / debit cards (Susbsitute products) - Proliferation of alternative payment systems leading to decline of 1-3% in check demand

- Expansion of the US economy which offers a favorable situation in the market debt

- Threat of possible downgrade...
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