Cash-rich resellers to drive consolidation

Sealing the deal: 158 resellers were identified as takeover targets

Cash-rich resellers have been likened to "kids in a sweet shop" due to the high number of distressed competitors available at bargain-basement prices.

Research from Plimsoll identified 189 UK ICT resellers that have built up sizeable cash piles that, due to the record low interest rates, are generating nothing.

And with 158 firms identified as potential takeover targets, Plimsoll predicted that as many as one in six resellers could change ownership as a result of the current economic crisis.

In all, Plimsoll analysed 676 firms with a turnover of more than £1m.

Report author David Pattison said: “These companies are now in the position to buy up large chunks of market share at rock-bottom prices and make that money work for them. They must be like kids in a sweet shop at the moment – all those distressed competitors available at a fraction of their true value."

Pattison added that the ICT reseller market is still widely regarded as one of the UK’s most fragmented sectors. With many directors eyeing the exit doors and highly leveraged buyouts consigned to history, it is a “buyer’s market” for cash-rich firms, he added.

“The market is set for a wave of takeovers in the next months,” Pattison said.

VAR Eurodata made its first acquisition in October and joint managing director Des Lekerman maintained that channel merger and acquisition (M&A) activity has been at a high level for some time.

“The number of privately owned companies has reduced dramatically over the last 18 months with all the M&A that has happened,” he said. “This is not a new thing.

“There will always be a compelling reason for independent companies to sell up.”