VARs urged to pounce in buyers' market

Rich pickings: falling margins have driven valuations down

Acquisitive resellers with an eye for a bargain have been urged to splash their cash while it remains a buyers’ market.

According to Plimsoll, the recession has forced 321 of the top 1,000 UK IT resellers into the red and valuations have fallen in line with profitability.

The analyst found that 325 senior decision-makers at these companies are now over 65, and questioned how long they would have the appetite to rebuild
their businesses.

Some 158 are woefully exposed to being snapped up as a “bargain acquisition”.
However, David Pattison, senior analyst at Plimsoll, advised the 349 “cash-rich” firms in a position to buy to act quickly.

“With the market starting to recover it is better to spend some of that cash on a discount acquisition than have it sat in the bank,” he said.

VAR Concorde made two acquisitions last February and March. But managing director Colin Meakin said that even cash-rich firms would be reluctant to dip into their reserves in the current climate.

“Although we are cash positive and came close to an acquisition in August, we are a bit reticent to put money into something now, no matter how lowly valued it is,”
he said.

“If you splash the cash you may find you need it to see you through, because profits are not coming through at the moment, unless you are heavily involved in services.”

Darren Boyce, chief executive of VAR Proximity Com­mu­nications, said: “Mergers and acquisitions generally happen when confidence is coming back into the market and things seem to be becoming more positive.”