Datatec, the Johannesburg, South Africa-based parent company of distributor Westcon Group, announced this week that it has signed a letter of intent with Landis Group, a $400 million distributor based in the Netherlands with operations in 10 European countries.
The merger catapults Westcon Group into a leadership position in voice and data networking distribution in Europe, giving the organization a Pan-European presence in one stroke of a pen. The groups' key vendor lines--Cisco, Nortel and 3Com--are complementary, but Alan Marc Smith, president and CEO of Westcon Group, says the deal will open the doors for the resultant organization to sign agreements with new vendors that are looking for global distributors with a presence in five or more European countries.
In an interview with VARBusiness' managing editor of special reports Karen Franse, Alan Marc Smith tells you what the deal means to Westcon Group and to you.
VB: Westcon has stated repeatedly that it was interested in expanding geographically. But why in Europe, and why now?
Smith: In the U.S., we were already covering the majority of vendors and felt we had significant enough market share that our growth in the U.S. was going to come organically. But in Europe, we were regiona--in the U.K., Germany and Belgium. In each of those markets, we had significant market share and material businesses, but we were not pan-European. A lot of the opportunities you get with resellers in the enterprise space are either global opportunities from the U.S. or Pan-European if they're coming out of Europe. We were able to logistically deliver the products [there, but you have cultural and language [differences, and those are significant barriers to entry. So, if you're trying to do pan-European rollouts through the U.K., and you have to deal with people that speak Spanish and French, it was a hybrid model and was not effective when competing with people with a pan-European presence, which is defined as five countries or more.
VB: What was the technology justification?
Smith: It was threefold. One is that the existing products they bring to the table we already carry. The second is with incremental product lines they bring to the table that we can expand into our businesses. %85 And the third is, there are some vendors that, because of these economic times %85 have fewer salespeople and resources and are looking for [intense coverage. Some of the vendors were only interested in dealing with a Pan-European player %85 so there are some incremental technologies that we will now have access to [as a result.
VB: Will you have a global credit facility to assist VARs that want to do global deals?
Smith: I would argue to an extent that we have that now, in the sense that our subsidiaries work with each other on credit. If someone called into Comstor and the deal is spec'd for Nortel, they will refer that to the Westcon division. But there are many opportunities for us to be able to leverage a global program for resellers where they would be able to have access to our multiple subsidiaries, multiple tech support, logistic, design and configuration [operations. And if we do our post-acquisition business planning properly, that will be one of the benefits that we'll bring to the table for customers.
VB: When do you anticipate the deal being finalized?
Smith: Right now, I would say we're hoping for 60 days, but it would not be surprising with the regulatory approvals you have to get and the size of the acquisition if it took longer than that.
VB: So what does this mean for the customer?
Smith: The customer can expect to see enhanced geographic coverage, enhanced solutions built around the technologies we will now bring in. They will see more products and technologies and solutions from us because we'll have the ability to leverage the pan-European model to get some of the [additional vendors that are looking for pan-European coverage, as well as ultimately being able to deliver a 'follow-the-sun' scenario. The end result of this--the intent--is for someone to be able to do business with us 24 hours a day through one of our subsidiaries. When this acquisition is complete, at any given hour of the day, one of the Westcon Group subsidiaries will be open for business.