SoftwareONE UK boss on the three trends driving M&A in the channel

Zak Virdi reveals what he thinks is driving the M&A spree in the UK and what the licensing giant is focusing on for this year

The M&A frenzy in the UK channel is likely to speed up over the next couple of years, according to SoftwareONE's UK boss Zak Virdi, who laid out three trends driving acquisitions in the industry during an interview with CRN.

Virdi is no stranger to M&A having overseen the software licensing giant's massive merger with Comparex a couple of years ago. Switzerland-based SoftwareONE has also been acquisitive outside of the Comparex deal, having snapped up Columbian MSP InterGrupo late last year, followed by Optimum Consulting and Intelligence Partner in January of this year.

Consolidation in the UK market shows no signs of slowing down, Virdi told CRN, and there will be further "waves" of M&A in the future - especially as the dependence on technologies continues to soar.

"I wouldn't be surprised if we're going to see another two or three big waves going on in the M&A sector," he told CRN.

"The rate of pace of change of technology is huge. The level of dependency on others' capabilities that are needed in terms of augmenting complete service offering opportunities for clients is ever increasing. I don't see there being any slowdown in the current M&A activity, if anything I'd see it increasing even faster."

He noted three factors driving the M&A spree in the UK, one of which is the uncertainty around capital gains tax. Last year some concerns were raised around a purported hike in the levy which Virdi said has perhaps instigated people to sell up.

The other drivers are the interest in the UK market from foreign investors as well as the ongoing skills shortage which is causing companies to buy others who have the skills they need.

"There are a number drivers for the consolidation we're seeing," he stated.

"There was probably some concern in regards to capital gains and then obviously the earn-outs for some of the acquisitions. I think that accelerated activity, especially towards the end of last year in preparation for the budget.

"The UK market is also becoming increasingly of interest to foreign investors, the pounds to external rates had dipped but has recovered recently. I think that could be another factor that's actually making UK entities quite appealing.

"The third driver is probably the key one: the opportunities for tech and how cloud computing is being accelerated, where entities are looking to acquire those skill sets to augment their existing capabilities, which is probably the key driver in terms of strategic growth."

Like many other channel firms, SoftwareONE has seen an uptick in the adoption of its remote working services over the past 12 months and this has served to establish its reputation as a services provider among clientele as well as the wider industry, according to Virdi.

Key focus areas for the company this year will be SAP and app modernisation, he added.

"Wehave pivoted from being a software company that sells services, to being a services company that happens to sell software," he explained.

"We've long spoken about helping our customers to digitally transform but we now clearly focus that digital transformation in two supporting areas: commercial transformation and technology transformation.

"We have had saved our customers£104m in the last 12 months through a range of our commercial transformation services like publisher advisories, digital supply chain, software lifecycle management and our PyraCloud platform.

"Our focus going forward is digital, commercial and technology transformation of our customers. We've come a long way from being a traditional licensing reseller!"