If the deal works out, Compel's #1 acquisition of Info'Products UK (IP) could work out as the channel bargain of the decade. This is a big if.
Compel is effectively being paid #18 million to take IP UK off the hands of Burhman. It is getting #28 million worth of assets, while taking on #10 million of IP debt. The price suggests two things:
IP UK's recent dismal performance and Burhman's keenness to start the New Year with a clean slate.
The opportunity for Compel is immense: the deal will expand turnover by up to 60 per cent (if it manages to retain all Info'Products accounts) and establishes the company as the clear number two in the corporate reseller sector, ahead of SCC.
Info'Products UK produced revenues of #170 million for the year ended 31 December 1997. From what I can gather, core IP UK business is running at about #140 million per year.
Compel has a superb record with acquisitions, the best of any UK reseller. Previous purchases either expanded the company's geographic spread (into Scotland with the Abtex buy, for example), or extended its business lines, getting into the rentals sector and cementing its mid-range operations through the purchase of Hamilton Rentals.
However, IP UK is a different kettle of fish, as Mike Norris, chief executive of Computacenter, points out. For the first time, Compel is buying a company that does more or less the same things in roughly the same places. IP UK has nine branches: eight in the UK and one in Dublin. The company has substantial offices in the City and Heathrow and a huge warehouse in Chelmsford - all of which Compel is interested in retaining. Yet there is much overlap with Compel's geographic coverage. So plenty of scope for property divestment there.
Norris, who subscribes to the 2+2=3 school when it comes to acquisitions, says: 'Compel is a very well-run company and (chief executive) Neville Davis is one of the best people in the industry. If he doesn't make (IP UK) work, we can all assume that acquisitions don't work - full stop.' Computacenter will continue to gun for IP UK accounts, he says: 'I like to think we are responsible for the price Compel paid for IP UK.'
Davis is confident that the company will retain the majority of the business.
'IP has little problem with service levels - it's leadership and strategic direction that corporate customers are concerned about. We will supply both.'
Compel will also have to do less restructuring work with IP, for the company has bought IP UK in mid-restructure. Industry scuttlebutt suggests 150 jobs are to go at IP UK in coming weeks, leaving 300 or so people to integrate into the enlarged group.
Compel's #18 million assets dowry will also help smooth the reorganisation.
And whatever the risks of failure, this is a deal Compel had to do - #140 million worth of new business is not something that comes along every day.
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