M&A players urged to stop bargain hunting and buy quality

Plimsoll tells VARs to look at 17 strong-performing acquisition targets and eschew the 88 distressed "classic acquisitions"

Channel firms have been warned to move their M&A strategies away from cut-price distressed rivals and splash the cash a little more to acquire fast-growing, debt-free firms.

Plimsoll has studied 906 UK resellers and picked out 88 as "classic acquisitions" – weakened companies affected by the recession and ripe to be picked off by predatory rivals. However, the market watcher's chief analyst David Pattison has urged channel consolidators to focus their efforts on 17 strong performers identified as ideal acquisition targets.

"These companies are privately owned, have increased in sales over the previous year, are debt free and are showing excellent profits," he said. "Taking over a weak company takes time, is diverting and is a high risk. But these high-value acquisitions would immediately add value to your bottom line as well as give you instant power in the market."

Pattison acknowledges that "some of these high-value acquisitions would command a high price premium", but asserts that there are good reasons "why some companies are worth more than others".

"Buying one of these companies would give you quick access into a fast-growing market and would instantly give you power, essentially forcing many of your already-weakened competitors out of the game," he added.