Exertis UK boss: We may never integrate Hammer

Gerry O'Keeffe says he and Hammer's management are already planning as far ahead as 2030 as he revealed the storage VAD will be run as standalone business for several years 'and beyond'

Exertis has pledged to take a different approach with Hammer than it has with previous acquisitions by running it as a standalone business indefinitely.

After years - if not decades - of sporadic dialogue, the Basingstoke duo have finally shaken hands on a £38.3m deal that will bolster Exertis' clout in the enterprise storage and server market.

Exertis UK and Ireland managing director, Gerry O'Keeffe, told CRN that Exertis has no intention of tinkering with Hammer or its management, which would mark a contrast to the approach it has taken with some other acquisitions.

"The conversation we were having over a pint when we finally signed on the dotted line yesterday is: what happens in 2030?," he said.

"That's the timeframe we're talking about in terms of the Hammer management and where they will lead the business into the next decade."

Exertis and Hammer both work with Dell but O'Keeffe maintained there was minimal overlap between the duo's portfolios or customer bases, and said running Hammer as a standalone business would ensure that specialism is not diluted.

"We're talking about an extended period of time. Two, three years - and beyond," he said. "It may never be right to integrate it; we don't know what the future holds in that regard."

"With other acquisitions, there may be a significant crossover with regard to the customer estate and range of vendors, which means it's right to integrate. That isn't the case with Hammer. Hammer has been hugely successful because of the focus it brings to the vendors it represents. We totally respect that and we wouldn't do anything to risk damaging that. There's a great opportunity for the sales teams to work together to deliver additional products to each customer base - that's where we see the opportunity.

"That involves lots of close working together, but it's important we retain the thing that has made Hammer successful."

The recent rash of distributor consolidation may worry some resellers but O'Keeffe said keeping Hammer separate would mean the two sets of resellers will see no changes to credit teams or credit lines.

Presumably in a dig at Tech Data and Avnet Technology Solutions' planned union, O'Keeffe claimed that cost synergies were not part of the business case for the deal.

"This is all about how we drive the top line and deliver wider and better services to both of our customer bases," he said. "Other acquisitions that are maybe taking place wouldn't have that kind of business case."

Hammer bolsters Exertis' presence in mainland Europe, particularly in the Nordics, as well as Germany, where O'Keeffe said his firm has limited presence.

"The key for us in the coming years is to support the growth Hammer has achieved overseas, and accelerate that," he added.

The all-cash deal, which needs regulatory approval, comprises not only an initial payment at completion, but also earn-out payments over three years based on Hammer's results.

Hammer managing director James Ward, who took the helm of Hammer in 2004 via an MBO, said he had "no intention other than to stay on and continue".

"I've been here 24 years and want to continue as long as I can, or as long as Gerry wants me," he said.

"From owning the company for 12 years, we could see there was a very strong synergy with the guys. We've talked for a long time with people and it felt like the right move for Hammer today. It felt right.

"The most important thing from being majority shareholder is this business is all about the people within it. What we and Exertis are planning will give opportunities for my staff to grow in the future - it's a glass ceiling off the top of my company and people can see they have the opportunity to become part of a bigger thing."

O'Keeffe confirmed that the two firms have had a decades-long dialogue, saying it was only now that the "planets aligned".

"We've touched base every so often over the years to see if it was the right time to talk in a more detailed way, and that's really happened over the last year," he said.

Alex Tatham, UK managing director of Westcoast, greeted the deal as another example of consolidation in the distribution space.

"Hammer are an excellent company - I used to compete with them a lot when I was at Ideal Hardware and I'm delighted for the people there," he said.

Also commenting on the deal, Barrie Desmond, chief operating officer at Exclusive Networks, said the ongoing consolidation among the big hardware distributors reflects the fact that the traditional on-premise IT market is shrinking.

"I think they've got to posture to get the best of what's left of the traditional vendors - the Dells, the EMCs, the NetApps and IBMs and so forth," he said. "So you're going to see the people who have that legacy business trying to consolidate that space to lever what value is left out of it."

Frank Salmon, CEO of CMS Distribution, said: "I think it's a good deal for both parties. I can understand it from Hammer's perspective. They've been through an MBO and been around for a number of years, so it's a great opportunity for the Hammer leadership team to crystallise their hard work and give themselves some options for the future."

Salmon also argued that the ongoing consolidation of the distribution landscape could present issues for resellers and vendors in areas like competition and credit.

"Where you have more competition, it's better for the industry," he said. "It's better for the resellers and vendors but it's also good for the distributors because it pushes distribution to drive operational excellence in their business. So if you're a vendor or a reseller, when you've got consolidation in your channels, it's an opportunity to re-look at your partners in the market and at whether you've got enough lines of credit and support and options for your resellers."

Bruce Hockin, director of storage solutions at Cloud Distribution, claimed that Hammer's acquisition would create more room for VADs such as Cloud to grow into.

"At a time of potential flux in a combined Dell EMC channel, and both as Dell partners, this union should work well in their favour," he added, referencing Dell's recent acquisition of EMC.