Arc calls for distribution union

Distributor debates plans to unite with rivals for security powerhouse

Arc Technology has mooted plans to unite with one or more of its rivals to create a security distribution powerhouse with revenues approaching £20m.

After completing a management buy-out last March (CRN, 26 March), the Nottingham-based distributor expects turnover for the year to 30 June to rise by 36 per cent to £7.5m. It is also poised to move into larger offices near Sheffield, complete with its first demonstration facilities.

Stuart Reay, managing director of Arc, told CRN: “I believe there is an opportunity to explore finding two or more organisations that have a cultural fit and put something significant together between £10m and £20m revenues that could attract a really big acquirer.

“It is early days, but we are trying to find synergistic relationships with other players in the £5m to £15m bracket.”

Reay said 40 per cent of Arc’s business is drawn from security technology, with 30 per cent coming each from network management tools and server-based computing technology.
“We are not reliant on a single vendor,” Reay explained. “If you scratch beneath the surface of most distributors below £30m, you will find a core relationship that the company in question is built on.”

Mark Hatton, chief executive of security distributor Sphinx, said: “It is going to be a struggle because there is a lack of £5m security distributors to combine with.”

Grahame Smee, managing director of distributor Cohort Technology, said: “This could work if there is a good fit, but when both businesses are small the management tend to be certain of their direction so it may not be easy to combine.”

Reay estimated that there are now just 20 security distributors left standing following an intense bout of consolidation. Last year saw the merger of VCW and Fresh Egg, Westcon buying Noxs and Sentryst going out of business.

“My main reservation is that 2007 witnessed a lot of acquisition activity and it may be that 2008 is a quiet period where the dust settles,” he said.