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More Microsoft LAR Consolidation: Softchoice Buys Software Plus
7:17 PM EST Tue. Dec. 11, 2007
The Toronto-based Softchoice paid what appears to be a bargain basement price of $45 million for St. Louis-based Software Plus, which with $192 million in sales on a rolling 12 month basis touts itself as the largest provider of Microsoft Enterprise Agreement licensing based on the number of agreements managed. The deal follows Dell's acquisition of ASAP Software, one of the top Microsoft large account resellers (LARs) in the country, in a $340 million cash deal, and PC Mall's $55 million August acquisition of Microsoft LAR Sarcom. Both those deals took place in August.
"Microsoft is down three LARs in the last six months," said one top VARBusiness 500 solution provider executive, who did not want to be identified. "The question is: Are they happy with that consolidation? At this point, there is less competition in the Microsoft LAR channel. The question is: Is that good for resellers and is that good for Microsoft? I would think Microsoft would be looking for new fresh blood to reinvigorate the LAR market."
The deal keeps Softchoice, which was No. 69 on the VARBusiness 500 this year, on its fast growth track and strengthens what the company is calling its standing as the fifth largest Microsoft LAR in North America.
Softchoice said the deal brings it Microsoft Enterprise Agreement expertise, virtual supply chain technology and TechCheck assessment services. What's more, Softchoice said there is very little overlap between the Softchoice and Software Plus customer base.
Softchoice said it expects the Software Plus deal to be accretive to shareholder value in 2008. Funding for the transaction was provided by an extension to Softchoice's current credit facility.
In a prepared statement, Softchoice President and CEO David MacDonald said the deal signals a move upstream into the enterprise space for Softchoice, which has been highly successful in the small and midmarket segments.
In an interview with CMP Channel earlier this year, MacDonald said Softchoice has increased net income by 47 percent this year and has grown its hardware revenue from $1 million to $200 million in the past five years. He said Softchoice's overall revenue growth in that time has increased from $402 million to more than $700 million.
MacDonald has said that Softchoice has been eyeing future growth both organically and through acquisition. In October, Softchoice agreed to buy the technology solutions portion of NexInnovations for $10 million.
Tracy Butler, president of Acropolis Technology Group, a St. Louis Microsoft Gold partner, said all things being equal he would like to see more LARs competing for his business. The problem, he said, is Microsoft software licensing is strictly controlled and all of the LARs have "always been close in price."
"We choose based on who doesn't compete against us in the marketplace," said Butler. "I don't know if I'm surprised. A lot of consolidation is going on right now. I am just glad that I am in the managed services solution provider business not in the software product business."
With players like Dell in the Microsoft LAR market, Butler said he ultimately chooses who he partners with based on who doesn't compete against him. "I would love to have more LARs competing against each other," he said. "What concerns me is when they do something that competes with me."
