Infinigate 'very close' to making big acquisition

CEO Klaus Schlichtherle says 'sizeable' deal close to being inked as distributor chases €1bn turnover

Infingate is on the cusp of making a "sizable" European acquisition, according to CEO Klaus Schlichtherle.

The chief executive told CRN sister publication Channelnomics Europe during our trip to Canalys' EMEA Channels Forum in Barcelona that Infinigate is closing in on a large acquisition in Europe, and expects the news to be announced before the end of the year.

Schlichtherle could not disclose any further details regarding the target company's geographic reach or size, but said that continuing to grow Infinigate's geographic footprint through M&A is a priority.

Infinigate is currently present across 10 countries in Europe, in the UK, France, Benelux the Nordics and DACH.

Although the chief executive did not confirm whether the acquisition will be in a new geography for Infinigate, Schlichtherle highlighted Spain, Italy and Poland as countries where the firm is lacking a presence, but also singled out its existing operations in the UK and France as markets for high potential growth.

The Swiss-based distributor has already made one acquisition this year in the shape of Dutch security VAD Crypsys in January. The firm sold a "significant" stake to US investor H.I.G last year, which then CEO David Martinez said would open up larger acquisition opportunities.

"We will have some acquisitions pretty soon and you will see some of that this year. It is very close to being announced. For us, it is sizeable," he said.

Schlichtherle, who spent almost 10 years at Tech Data before moving to vendor Logitech, is not directly involved in M&A talks, describing himself as more of an "operational CEO". Instead, Martinez, who stepped down as CEO at the start of the year, has been engaged in behind-the-scenes discussions with potential acquisition targets.

"David is president of the advisory board in Switzerland. He is completely out of the day-to-day operations, but he does M&A. Of course, he has more or less left the office, but we meet quite often," Schlichtherle said.

"He travels, does the discussions, does the contract negotiations, he does everything. It would take up 50 per cent of my time to do it myself. I focus on developing the group business and the company organisation, and he is developing the vendor relationships and M&A strategy."

Acquisitions will play a role in growing Infinigate's footprint and strengthening vendor relationships as the value-added distributor looks to hit €1bn revenues within the next three to four years.

Infinigate has hit an average revenue growth rate of 27 per cent over the last 15 years, a figure Schlichtherle claims will be sustainable for the next couple of years after it reached a little over €400m in revenues last year.

"I would say the security market grows around eight or nine per cent globally every year. So, if you just ride the wave, you grow eight or nine per cent. If you do an acquisition, and a lot of these companies have been acquiring, you will easily hit 20 or 30 per cent growth, as we have done the last 15 years. If you take the organic growth of eight or nine per cent, then you grab a little bit of market share, you sign a new vendor, acquire a company, then you're at 20 per cent easily," he said.

But Schlichtherle said he will not sacrifice profitability for top-line growth. Some of Infinigate's competitors - such as Nuvias and Exclusive Group - have signed on with multibillion-dollar vendor giants such as Juniper Networks and Cisco.

Infinigate is unlikely to follow suit, claims Schlichtherle, who said working with the industry's top vendors often means embracing lower profit margins.

"For us it would not work," he said. "Nothing against those big vendors - they have their space for a good reason - but when you work with those big vendors and you're selling to big customers, your margins are bad. Those vendors will have their own salesforce and hundreds of people in the field, so my value-add is limited. When I go for vendors that are not in the enterprise business, more in the mid-sized business, then I can add a lot of value."

"If you try to scale your business on the largest vendors it is not good for your balance sheet and not good for your profitability. I would rather grow a little less and have a healthy margin around it. We always said we want to do €1bn in revenue. We will be able to do that, but only in a space where we can earn good money."

Schlichtherle (pictured) said that working in the mid-market space means Infingate avoids competition with Tech Data, Ingram and - the majority of the time - Exclusive Group.

But a potentially disruptive force will soon be crossing the Atlantic to Europe's cybersecurity market as $2.2bn-turnover MSSP Optiv plots a European expansion drive headed by ex-Integralis exec Simon Church.

The Infingate CEO said "I haven't really made my mind up" over what Optiv's move into Europe will mean for security VADs.

"I have noticed they are coming. I am not sure what the impact will be on us, or on the industry or on the market… I have not really understood so far what their role will be in Europe and what exact business model they will be putting out. I have heard a couple of times that people are looking at it," he said.

"Would they be a customer of ours or a competitor of ours? Will they try to get contracts directly? I don't know, I really don't know."