You may now view the rest of Nuzoo in all its glory!

Click anywhere to proceed and fill your face with news, glorious news!

Nuzoo blog: M&A continues apace in the IT channel

This week UK managed service provider (MSP) CMI continued on the acquisition trail with the purchase of London-based cloud services provider (CSP), Brookland. The acquisition takes CMI to a turnover more than £13 million with a staff of 100, based in four sites across the UK – Belfast, London, Cheam and Reading.

It got us thinking about the current state of play regarding M&A in the channel. I chatted with Ken Roulston, CMI’s managing director, about whether the Covid pandemic or Brexit had impacted the UK market.

He said in CMI’s case, the pandemic has accelerated the pace of digital transformation by about three years, which has increased client demand for their providers to have strength in the Modern Workplace.

“As many businesses look to their MSP/CSP provider that has also accelerated the market consolidation that was already heating up before the pandemic,” he said.

Ken also said there is a lot of money going into companies that have high levels of IT recurring revenue, namely greater than 70 percent. “Companies that have an EBITDA of £500k+ and those with a strong vertical focus are particularly attractive,” he said.

Over in the US, The Channel Co. recently reported that vendor M&A is having an undeniable effect on their distributors, resellers and solution providers.

“In the telecom space, the biggest carriers are getting bigger, causing the master agents and other partners in the space to consider acquisitions just to keep up,” it noted.

I also had the opportunity to talk with Simon England, CEO of pan-European distributor Nuvias Group about its recent acquisition of Cloud Distribution. Simon’s view on acquisitions, especially within value added distribution side, is that you “acquire into a strategy – you don’t follow the opportunity and change the strategy as you go.”

He also says that as well as strategic alignment, acquirers need to see cultural alignment.

“You need to see how people go together, especially if you’re buying a business with 29 people,” he said. “If you don’t take culture into account or the key people, and you lose half the team, what have you bought? If you lose the business because you lose the people — what have you got left?”

It’s better where you have a clear view of what you want to do, and then you approach your company, and try to get validation that ‘yes, they’re going to help me accelerate on a strategy I already have.’”

UK systems integrator (SI) Sapphire Systems has been on a spending spree in 2021, snapping up several SAP partners, including extending further into the US.

When it comes to M&A activity in the SI space, it is very much a game of two halves, says Ian Caswell, CEO, Sapphire Systems.

“While the big consultancies like Accenture and Capgemini will of course benefit from acquiring more specialist, dedicated expertise in this field, there is a risk that this trend might reduce choice for the customer and potentially impede progress when it comes to the ‘last mile’ nuances of implementing a modern core operating platform,” says Ian.

“We see a huge opportunity for mid-size consultancies like Sapphire, where this kind of boutique approach, which is built around education, understanding the very specific profile of a particular business challenge, and maximising value at each stage, is very much engrained in our DNA.”

In terms of advice for any channel firms looking to acquire (or be acquired) in 2021, Ken believes it’s a great time to buy and increase the accretive value of their business as a result of larger levels of EBITDA. “But also for sellers, there are lots of buyers in the market currently. The key thing is to decide on where you want to be in three years’ time and put a plan in place accordingly.”

Author: Christine Horton

Publish Date: 11/06/2021 14:28

© All Rights Reserved. The Nuzoo platform is built and managed by Purechannels Ltd. Registered in England. Company Number: 05485704.

Purechannels® is a registered trademark No: 017958605. Registered Office: 20 Havelock Road, Hastings, East Sussex, UK, TN34 1BP.