MD Paul Bryan opens up over £2bn-distributor's growth plans, the likelihood of distressed acquisitions and shedding its tag as a broadliner
Exertis may be tussling with Tech Data for pole position in the UK distribution market, but most resellers don't realise just how big it has become, nor the full range of products and services it now offers, its managing director has admitted.
The Exertis brand was formally born in September 2014 but revenues last year reached £2.44bn, with 72 per cent - or around £1.76bn - of that total drawn from the UK.
Since its rebrand two and a half years ago, the Anglo-Irish distributor has boosted its scale and repertoire through an acquisition spree that has taken in Cohort, Computers Unlimited, Siracom, Hammer and Medium.
Exertis managing director Paul Bryan (pictured) told CRN that it is time the DCC-owned distributor had a "louder voice" in the market.
"We've stayed under the radar accidentally on purpose, because we were seen as a bit of a speed-boat to go around some of the bigger boats and take advantage of the market," he said.
"But our scale now is right up there at number one or two. Avnet has obviously taken Tech Data to a different scale, but before that we would have been number one. I don't think a lot of customers realise that and understand the breadth of the products and specialisms we've got, so it's time to change that."
Exertis' UK business is historically biased towards consumer, but its recent blockbuster acquisitions of enterprise storage VAD Hammer and audiovisual specialist Medium mean the consumer-B2B split is now a more even 60-40.
The distributor recently appointed former HP and Fujitsu executive Kevin Matthews to spearhead its enterprise business, one of three units on the B2B side alongside volume IT and audiovisual.
"We are working to more of a 50-50 balance, and that's by concentrating on enterprise and scaling that up further," Bryan said. "In audiovisual, we are absolutely challenging to be number one and in normal IT volume, on most categories we are either number one or two in the market."
"We will take advantage of anything that appears where we think a cash injection is needed - I think there will be some distressed buys over the next year" - Paul Bryan, Exertis
Medium is currently in the process of being integrated, Bryan said, and although an 'Exertis-Medium' moniker will be used in the mid-term, ultimately it will be known as Exertis AV.
Hammer, however, will be kept as a standalone entity.
"Hammer's systems have not been integrated and it has its own warehouse, but of course we are looking at customers and products to make sure we get the best out of cross-sell," Bryan said. "They've both got service elements that we are pulling together. We have a 24/7 NOC which we white-label on behalf of resellers to manage security threats and do training, install, break-fix, configuration, so there's a whole manner of services there and, again, some of them are best-kept secrets."
Although Exertis has a footprint in almost all parts of the IT and comms market - offering everything from home routers and TVs to hyper-converged storage - Bryan rejected the tag of being a broadliner.
"That breadth of product - I always get a bit paranoid that we will be called a broadliner," he said. "Yes, we have a vast portfolio, but we would absolutely want to be considered a specialist because we spend a lot of investment and time making sure we have people faced into those products and services in a particular market. What I would consider to be a broadliner - 'it's on a shelf; come and pick it up' - we are trying to be a lot more specialist than that."
Bryan said Exertis has had nearly 1,000 pre-registrations for Plug-In to Exertis, a first-of-its-kind event the distributor is holding at Wembley in May to showcase its wares.
"We're very conscious that Exertis - prior to now - was a collection of Micro-P, Gem, Computers Unlimited, Siracom etc," he explained. "We've become this Exertis brand and we need to get out into the market and set out our stall to make sure people know what we do."
Exertis suffered a "very difficult" fiscal 2016, with like-for-like UK revenues falling seven per cent due to a reduction in sales from an unnamed large supplier and weak demand for tablets, smartphones and gaming products.
However, in the first half of its fiscal 2017 ending 31 March, Exertis' revenues rose 5.1 per cent, with the UK business delivering "strong growth".
Bryan claimed that Exertis is enjoying a strong finish to its fiscal year.
"The devices market isn't particularly lighting up; we're not going to see double-digit growth in tablets, phones and computers," he said. "It's still a really important part of our business, but other areas are starting to see better growth, which we are focused in on, one of those being audiovisual, another being the enterprise piece, not just storage and server, but also wireless and security. We are pretty happy with the performance."
Bryan claimed that the currency fluctuations caused by the Brexit vote had caused "choppy waters" for distribution, and predicted that Exertis could pick up some of the smaller distributors struggling to stay afloat.
"There will be consolidation as I think those smaller players will find the choppy waters tough," he said.
"We will take advantage of anything that appears where we think a cash injection is needed; I think there will be some distressed buys over the next year. But if we were able to take our pick, we would definitely look at the areas where there's more of a service wrap, not your commodity products."
Tech Data, whose UK business reported revenues of £1.95bn for its fiscal year ending 31 January 2016, completed its acquisition of Avnet TS last month and Brian predicted that distributor M&A will only accelerate.
"We are seeing further consolidation in both the manufacturer and distributor landscape," he said. "It's a tough market out there and people just need to leverage better, and I think we will see more consolidation happen. My comment on Tech Data is, 'good luck'. Globally, it's huge in terms of the scale they are taking on and I'd like to think that while they are busy integrating it and distracted, we can take full advantage. But we will see more of it, and I dare say we will be back in here doing an interview about another acquisition we've done because that's just the way the market is going.
"But I think as distributors get bigger, the onus is on staying specialist. That's the most important thing, which is why we are really trying to put the customer at the centre of it. We are delivering what they need rather than just saying 'we've made ourselves bigger - oh look, there's more on the shelf'. That's not what the market wants. Distributors have to become more service-enabled, so that's definitely where we are going."