Consolidators poised for multiple mergers

The UK channel is poised for a glut of mergers and acquisition activity as research indicates that at least 29 IT resellers are ‘prime targets’ for takeover and another 51 could be sold off.

The study of 530 IT resellers, by market-watcher Plimsoll, also identifies a group of 26 major consolidators and 41 mid-sized ‘predators’ ready to part with their cash.

David Pattison, senior analyst at Plimsoll, said: “These numbers surprised me, given the market’s lacklustre growth. The perception is the market is not as exciting as three or four years ago, but there are 26 companies who are contradicting this.”

Pattison also said that there is a clear “food chain” in terms of who is buying whom.

The 26 major consolidators will make their purchases from a separate pool of 88 mid-sized VARs with annual sales of around £5m, he said.

Meanwhile, the more cash-strapped ‘predators’ will hunt for bargains among less established resellers.

“There is a watershed in all business, but this is especially true of the IT market,” Pattison said. “Firms with £4m turnover or beyond, that have proven to be independent of any one individual, will attract the eye of larger firms and can demand a hefty price.”

Scott Fletcher, chief executive of VAR ANS, said: “Mid-tier resellers making £10m-£20m are buying the £1m-£5m guys to make themselves attractive to VARs such as Azzurri.

“We’ll resist being bought for as long as we can because we see an opportunity to grow the business, but at the end of the day, it all comes down to economics.”

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