Consolidation of Two VAR 500 Companies
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Logicalis Group has agreed to acquire Netarx for about $34 million in a deal involving two VAR 500 companies.
The acquisition expands Logicalis' overall operations in the Midwest, its managed services practice and adds a Tier 1 service desk to the Farmington Hills, Mich.-based solution provider.
Netarx, based in Auburn Hills, Mich., is ranked No. 262 on this year's VAR 500 and has revenue of about $60 million, according to Logicalis. It was founded in 1997, has about 170 technical and service delivery employees and provides managed services, data center, collaboration, and infrastructure design solutions in the Great Lakes region and Arizona.
Logicalis was ranked No. 24 on the 2011 VAR 500, up 52 spots from last year's list.
"We've known Netarx for a long time. They are Michigan-based biz as is Logicalis. For many years, had we've had mutual respect for the leadership of Netarx. We felt that the culture of the organization mapped almost perfectly to ours," said Greg Baker, Logicalis' CFO for the U.S. business.
Logicalis expects to retain all Netarx employees and to add to their ranks to take advantage of growth opportunities opened as a result of the acquisition, Baker said.
"We are very selective as to the targets we go after. Everybody at Netarx are safe and secure. We're only going to grow. We're treating this as a business unit to Logicalis," Baker said.
Despite its global reach, Logicalis only had about 20 sales and services delivery professionals in its home state of Michigan, Baker said. Now that number grows to close to 200 with Netarx.
"We have 11 sales regions across the U.S. and our goal is to be number one or number two in every region we operate. We believe this will bring the financial strength and broad portfolio to an extremely-talented team of Netarx to truly be a powerful combination," Baker said.
Netarx marks Logicalis' 11th acquisition in 12 years. Most recently, Logicalis purchased Network Infrastructure Corp. (NIC), a Cisco Systems gold partner last December.
Logicalis CEO Terry Flood was named the VAR 500 Executive of the Year for 2011 after helping Logicalis incrase revenue by 29 percent to $1.1 billion in 2010.
"Netarx goes to market as a true pure-bred solution provider. Over half of their gross profit comes from delivered services. That's a place we want to be. It creates more relevancy with our customer set," Baker said. "They're a mature and efficient services desk team. They have more employee-centric issues than data-center issues. A lot of our customer base has been asking us for further outsourcing of IT needs. Historically we've been unable to meet that demand. Netarx's services desk allows us to broaden the Logicalis portfolio and frankly grow. We anticipate that team growing on the way forward."
The Logicalis-Netarx deal is the latest involving a pair of VAR 500 companies. Baker said he expects consolidation among solution providers to accelerate over the next 12 to 18 months.
"What you're seeing is a lot of smaller guys that haven't had the desire or the wherewithal to invest in more outsourcing support services for customers. They've relied on product resale are looking at the future to determine how to compete and stay relevant in a changing marketplace," Baker said. "The economics are becoming clear. Customers are looking increasingly to solution providers that can provide a broader option of IT outsourcing to get where they are trying to go. That requires significant internal investment. That coupled with an improving credit market is really what's boosting this."