In a bid to expand its presence in the emerging markets, Iron Mountain (IRM - Analyst Report) recently acquired Archivum, a Brazilian document storage company. This is Iron Mountain’s second acquisition in Brazil. The company acquired Grupo Store, an information management company in Apr 2012.
The Archivum acquisition strengthens Iron Mountain’s presence in Sao Paulo, touted as Brazil’s business capital. Moreover, the company would gain approximately 700 customers from the current acquisition.
Iron Mountain has been pursuing an aggressive acquisition strategy to supplement organic revenues from the storage business. Some of Iron Mountain’s recent acquisitions include Safe Records Center, Archives USA and The Document Bank in May 2013, Datastore and Data Technology Services in Jan 2013 and IG2 Data Security Inc., DATAPROS Storage and Staffing LLC, and Data Backup Inc in late 2012.
We believe that the company will continue to pursue accretive acquisitions in this segment. Storage is an integral part of Iron Mountain’s revenue structure and contributes nearly 57% to its total revenue. The company recorded a 4% increase in revenues from storage in the first quarter.
We expect Iron Mountain to drive significant growth through acquisitions ($60 million spent on acquisitions year to date) in the fast-growing countries like Brazil, Russia, China and India, which will boost its international revenues, going forward.
We believe that diversification and expansion of its business will help the company to counter sluggish growth from the domestic and European markets over the long term.
However, tepid internal growth coupled with volatile foreign exchange rates and a decline in recycled paper prices are expected to partially negate the company’s strong product portfolio, increasing market share and a promising international business.
Moreover, competition from Hertz Global Holdings (HTZ - Snapshot Report), Pitney Bowes Inc (PBI - Analyst Report) and Guidance Software Inc (GUID - Snapshot Report) are headwinds for the company. Additionally, the recent enquiry by Internal Revenue Service on its REIT conversion request will remain an overhang on the stock in the near term.
Currently, Iron Mountain carries a Zacks Rank #3 (Hold).