Mergers and acquisitions: Not just for large resellers
By Seth Fineberg
Read this article at Accounting
Today
Irving, Texas (July 26, 2004) -- These
days you don’t need to be a technology mega-reseller like an Altara
or Tectura to think about expansion through mergers and strategic acquisitions.
In fact, given the recent consolidation of major business application
vendors, many small to mid-tier resellers are thinking more about where
they want to play now and in the future. Moreover, they are discovering
that organic growth is not always the answer.
“At some point they [smaller firms] are asking themselves, ‘If
I can only invest X dollars and it will only raise me to Y, am I satisfied?”
said Tectura chief executive Terry Petrzelka. “Partners of the past
saw themselves maybe being a generalist. But you are no longer able to
do that if you can finally say, ‘I can go out and get big deals of
any size I want to.’”
It’s that perspective that is beginning to translate down to firms
a fraction of the size of Tectura, a major Microsoft Business Solutions
reseller that currently has 25 offices and 500 employees worldwide.
For nearly seven years, New York-based
Best Software and Accpac product reseller Net@Work has been able to grow
its business organically, adding products, staff and services as needed.
Now, in the current environment, the nearly $7 million business felt that
it was time to consider strategic acquisitions, not only to help themselves,
but to help other small firms as well.
“Given all the consolidations going on with the manufacturers, there
are resellers that are apt to compete in the same family, and it makes
sense for them to join up with those who do complementary products,”
said Net@Work co-founder Ed Solomon. “To build things from scratch
takes time and it’s costly. It’s about selling a full solution,
and that’s hard to do when you only have one product.”
Company co-founder and sibling Alex Solomon explained that the firm’s
current growth strategy is simply about bringing in smaller resellers
with a customer base that may be outgrowing them, or firms that have a
“specific skill set and talent, primarily within the product lines
we carry and in the
geographic area we serve.” Solomon also noted, “Most importantly,
it’s got to be something that would be a good fit for them and us.”
Net@Work recently found its first “good fit” with the purchase
of Lichtman Information Systems, a small but experienced Accpac Pro Series
reseller from nearby Long Island, N.Y. Founder Shimon Lichtman admitted
that even after 18 years as a developer and reseller, there is only so
much he could do for his clients given his size.
“I know the Accpac product by heart and I can take care of nearly
any problems my clients call me with, but there is only so much I can
do in trying to maintain my own client database. It took away a lot of
my time and capabilities of expanding,” Lichtman said. “I want
to be able to grow as my clients are growing, rather than finding someone
else to take care of a particular problem. Net@Work not only sells accounting,
but e-commerce, customer relationship management and networking, and a
lot of my clients need more of those solutions.”
Solomon said that his firm’s entire sales team is now structured
to handle its current growth strategy in order to easily acclimate any
newly acquired staff.
Helping the odd man out
NextLevel Information Solutions, another long-time Accpac product reseller,
has also looked at the current environment and decided that growth through
strategic acquisition would be its best path. Much like Net@Work, this
now 28-person operation — thanks to its purchase of customer relationship
management specialist Apex Business Solutions — realized that they
could help themselves and other firms to grow through the right purchase.
“With the recent Best mergers, some of the smaller tech firms in
the family will worry they will be the odd man out, and for us it’s
a great opportunity to reach out to them,” said Manny Buigas, NextLevel’s
vice president of sales and marketing. “In the Apex case, they are
in a great market we’d love to expand into, and their technology
expertise allows us to go after the ‘type A’ client that will
assist us in growing strong.”
For a firm like SWK Inc., a Best Software reseller from Livingston, N.J.,
being acquired was more beneficial than doing the acquiring. The firm
spent years trying to figure out the best way to grow, and finally found
it through Trey Resources Inc., a spin-off from voice and speech recognition
technology maker iVoice Inc.
Trey has a $10 million financing facility, and intends to use that to
expand and acquire other companies. SWK president Lynn Berman believes
that the acquisition, and the subsequent monetary infusion, will finally
allow the firm to evolve the way that it wants to.
The firm expects that its staff of 16 will grow over the next year as
it engages in new offerings, particularly for its latest venture. SWK,
through a joint venture with bar code technology vendor Scanco LLC, has
developed RF Barcode Master for Mapadoc — SWK’s proprietary
electronic data exchange solution for MAS 90 and MAS 200.
“As a small or midsized company, it’s hard to grow organically.
We evaluated getting private capital or merging into a CPA firm, but they
didn’t always get what we were about,” Berman said. “Even
with private capital, it’s a high price to pay as you accumulate
debt and often give up control. We have the experience of seeing what
else has happened in our industry, and this is the best step for us.”
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