Bell Micro To Acquire Stake In ProSys

ProSys, a privately held company with about $400 million in revenue last year, provides storage, server and IT infrastructure solutions and consulting. Its top vendor partners include Hewlett-Packard, IBM, Cisco Systems Panasonic and Network Appliance.

Bell Micro will pay $41 million in cash and stock for 48 percent of ProSys. Additional payouts are possible if certain financial performance levels are achieved, according to the company. ProSys will continue to be run by Michelle Clery, one of the solution provider's founders.

In addition, Bell Micro will acquire certain assets to establish a wholly owned subsidiary called ProSys Information Solutions, which will focus on small and midsize businesses. The new subsidiary will include Biz-X-Change, an IT procurement application, and be led by Bruce Keenan, one of the original founders of ProSys.

Bell Micro entered the solution provider business in 2001 when it purchased TotalTec. That business, combined with ProSys, will generate about $500 million in annual revenue, and its geographic reach spans from New England to Florida and as far west as Texas, according to the San Jose, Calif.-based distributor.

"We are hoping to grow that business to $1 billion by the middle of 2008. We're looking at more acquisitions on the West Coast and in the Midwest. We hope to do it earlier, but we don't want to jump into something for the sake of doing it," said Don Bell, chairman, CEO and president of Bell Micro.

With the ProSys deal, Bell Micro expects little channel conflict with its distribution customers because of its experience with TotalTec, Bell said.

"We run the businesses independently of each other. They run on different systems. Informaiton is not shared. We concentrate on doing that, and we do it very well," Bell said. "A year ago, a [distribution] customer called up all angry and said we were competing with him. We looked into and it, and we were not competing as much as he thought. But we backed out. He was a good, long-term customer. A week later, he called up and said he wanted to have dinner. I said, 'Oh, my god.' I took a deep breath and said, 'How is everything? He said fine. I said, 'How about the problem?' He said, 'You fixed it.' You can't do it in every case. There is coopetition. Our challenge is to build a technical capability to supply to end users and other resellers that complement the business we have."

Clery said ProSys has talked with numerous potential buyers over the years since the company launched in 1997. She chose Bell Micro because it could bring the most to the solution provider's customers.

"We were looking for someone to work together, someone in our industry. We weren't interested in selling out to an investment company," she said. "We wanted someone who understands us and could expand our market and get us into other areas, other platforms where we don't have expertise to bring to existing corporate accounts."

The deal is the latest consolidation move in the solution provider channel, including CDW's deal to acquire Berbee Information Networks and Logicalis' acquisition of Computech Resources.

Bell, who continues to seek solution provider acquisitions for Bell Micro, said the trend is escalating because of the need to provide more technology to customers at a lower cost.

"That's particularly true as the price of supporting the customers gets bigger," he noted. "You need technical resources to do it. You can't put it all in every marketplace and make money at it."