Confidence keeping channel value high
Survey finds distributors and resellers in buoyant mood
Reseller confidence has remained buoyant, leading to an increase in the value of UK channel companies, according to one market watcher.
Analyst firm Plimsoll questioned 377 UK distributors and resellers about the valuation of their companies based on recent performance. Sixty-five per cent of respondents saw their value increase in the past 12 months, some by as much as half.
According to the survey, nine per cent of companies saw no change in their valuation, and 26 per cent suffered a fall in value.
David Pattison, senior analyst at Plimsoll, said the main reason for the increase in valuations is confidence.
"The owners of these companies seem to be more bullish about their value as the market continues to perform. We are coming out of relative doldrums and there is an element of positivity among companies," he said.
"In 2004 many companies in the industry focused solely on increasing sales, but ironically, it is the firms that chose to improve their internal structures that have increased in value the most."
Alan Norton, head of intelligence at credit services firm Graydon, said: "A lot of firms looked to cut costs and streamline their business in the difficult times. Only the fit and healthy companies have stayed completely viable."
However, he added that there is always a risk when buying at a high price. "With management buy-out teams in particular, people are asking for higher premiums and firms end up paying too much, which can put a financial strain on the firm," he said.
"Many people are more positive this year, but a lot still depends on the economic cycle. However, there are still profits to be made in the channel if firms are selling the right products and services."