VAR500 M&A: 20 Networking Channel Acquisitions Worth Watching12:00 PM EST Fri. Mar. 02, 2012
Consolidation among major solution providers is nothing new, but recent months have brought a number of eye-popping M&A moves specific to the networking channel, especially among major Cisco and Avaya players and VAR500 companies.
Here are 20 of the most significant such moves from the past 18 months, all involving VAR500-ranked solution providers with major networking, data center and infrastructure practices. Rest assured there have been -- and will be -- many more.
A blockbuster: Cisco's top global partner, integrator giant Dimension Data, was picked up by Nippon Telegraph & Telephone (NTT) for $3.3 billion in late 2010, marking one of the biggest deals between VAR500 superpowers and networking and telecom channel specialists in ages.
Sirius Computer Solutions' acquisition of MSI Systems Integrators in November 2010 made it a $1 billion solution provider, hitting a milestone the vast majority of solution providers never come close to. MSI brought Sirius a range of IT integration services including IT and data center optimization, virtualization, security, UC and business continuity. Of note was MSI's strong networking and managed services footprints, including its status as a Cisco Gold partner.
A merger of Cisco Gold partners came to fruition with Logicalis and Network Infrastructure Corporation (NIC) in late 2010. In NIC, Logicalis got a $20 million, Phoenix-based Cisco specialist and continued what's been a pretty consistent streak of M&A activity for years.
Acquisitive solution provider NWN, which has a large networking and infrastructure footprint as well as a fast-growing business in application development and mobility services, picked up Microsoft Gold partner ComFrame in early 2011, giving it reach into the South and an international office in Beijing.
Top Avaya partner Carousel Industries snapped up Juma Technology Corp., a fellow East Coast Avaya stronghold, in February 2011, continuing what was then a recent streak of acquisitions by Carousel.
Already in 2011, Carousel had picked up a small Nortel player, TAC Centre, and would less than a month later go on to acquire OmniPresence, a Massachusetts-based A/V integration and video and collaboration specialist. OmniPresence later became the core of Carousel's Visual Communications and Collaboration Group.
Paetec was known as a service provider with a thriving carrier agent and VAR channel of its own, but it also acquired several VARs over the years, most recently Xeta Technologies, a major Midwest Avaya Platinum partner, for $61 million. In a prime example of big, bigger, biggest, Paetec itself was acquired in the fall of 2011 by Windstream in a deal worth $2.3 billion.
Strategic Products and Services was already one of Avaya's largest national solution provider partners but continued its recent streak of Avaya-centric acquisitions with a February 2011 pickup of Spenser Communications, which expanded SPS' presence into Southern California and Arizona, among other territories. Spenser at the time was an Avaya Platinum partner and also held prominent partner statuses with Extreme Networks, SonicWall and Cisco.
Distributor Arrow had already raised eyebrows with its acquisition of Shared Technologies. In May 2011, Arrow bought top Avaya partner Cross Telecom, and ended up folding the Shared and Cross properties into a new networking unit called Arrow S3. Channel partners are still curious about whether Arrow S3 will continue to grow by acquisition, and Arrow recently named former Insight North America president Mark McGrath to be S3's new president.
Transcend United was itself formed following the 2009 merger of Fastech Integrated Solutions, Aserdiv, Ixillix and Transcend Communications, and the company hasn't stopped acquiring other solution providers since. In May 2011, Transcend bought LiquidSpoke, becoming one of the country's largest networking and UC-focused solution providers.
Technology Integration Group (TIG) is another well-known communications- and data center-focused channel player with swagger, and it too has been an active acquirer. In early 2011, the $344 million solution provider made its eleventh and twelfth major acquisitions, picking up Albuquerque, N.M.-based Integrity Networking Systems and Pensacola, Fla.-based WAVEnet Technologies. The former was a one-time $50 million VAR that had fallen on hard times, according to TIG CEO Bruce Geier, and the latter was a $10 million VAR with a good-size Cisco UCS and video practice serving Southeastern U.S. customers.
Global integrator giant Dimension Data, which was itself acquired by even larger service provider NTT in 2010, picked up cloud and managed hosting provider OpSource in June 2011. Less than eight months later, it went live with Dimension Data Cloud Services, which include advisory and consulting services focused on IT optimization, data center consolidation, computing-as-a-service virtual servers and storage.
Logicalis hasn't stayed out of the M&A game by any stretch. The company followed up its December 2011 acquisition of Cisco Gold partner Network Infrastructure Corp. by grabbing a fellow VAR500 solution provider, Netarx, for $34 million in July 2011. The deal was Logicalis' eleventh acquisition in 12 years, and Greg Baker, Logicalis' CFO for the U.S. business, told CRN at the time that consolidation among solution providers would likely accelerate over the next year and a half.
In November 2011, it was a big-time merger of two of Canada's best-known solution providers: Softchoice, Canada's largest VAR by revenue, collecting Unis Lumin. Both companies are Cisco Gold partners, and Softchoice CEO David MacDonald told CRN that the Unis business gives his company a bigger networking and services footprint than before, particularly in professional services.
Presidio bought INX for about $85 million in November 2011, expanding Presidio's reach in the Western and Southern U.S. territories and creating what John DeSarbo, Presidio's senior vice president of marketing, told CRN was "more geographic breadth [to open] up a lot of opportunities for us." Presidio has been one of the channel's most acquisitive VARs, and INX added to a streak that had previously included Coleman, Ficomp and Solarcom.
In yet another acquisition by SPS of a fellow Avaya partner, the solution provider picked up Imagine Technologies in December. Buying Imagine, which was crowned an Avaya's U.S. Channel Partner of the Year only weeks earlier, expanded SPS' headcount to 470 people in 30 cities.
As one of the country's top solution providers, ePlus -- a publicly traded company, no less -- is no stranger to acquisitions. In early January, ePlus added to its Northeastern U.S. presence with the acquisition of VantiCore, a Bedford, N.H.-based UC and contact center specialist with a sizable managed services footprint and an emphasis on Cisco products and services.
One of Transcend's biggest moves to date happened in mid-February 2012, with the pickup of more than half of Relational Technology Solutions' overall assets. That move bumped up Transcend's Avaya status to Platinum, gave it higher status with a number of other vendors, added to its geographic footprint and also made it a member of Avaya DevConnect, Avaya's program for offering developer resources for Avaya products.
With its late February acquisition of Commercial Data Systems, TIG has made a baker's dozen of them. CDS, a $50 million VAR, is its thirteenth, largest to date and expands its enterprise solutions and managed services capabilities, as well as adds some lucrative government contracts.
"It's completely a buyer's market right now," said Bruce Geier, TIG's CEO, who told CRN he gets nearly a call a day from VARs looking to sell. "Unfortunately for the smaller players, we've had a lot of cash crunches in this economy."
EPlus' thirst for acquisitions went unslaked another month, as the company in late February confirmed a buy of Pacific Blue Micro, a 30-year-old Irvine, Calif.-based solution provider and like ePlus, a highly regarded Cisco Gold partner with many common communications and data center specialties.
EPlus recently touted its acquisitions as key to its impressive growth. The solution provider for its fiscal third quarter reported revenue of $272.6 million, up 18.5 percent year over year.
On Leap Day 2012, Presidio confirmed it had acquired BlueWater Communications Group, and that BlueWater's CEO, Bob Cagnazzi, would become CEO of Presidio. The monster solution provider had been without a permanent CEO since the departure of Joel Schleicher last year, and Cagnazzi goes from management of a roughly $250 million company to a roughly $2 billion one.
"We felt we needed to be better positioned over the next few years to build managed and cloud-based services, and we needed the type of size and scope they have to fast-track those investments. It's been very well received by our employees and clients," Cagnazzi told CRN.