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All Together Now: Mergers And Acquistions

Activities surrounding the mergers with and acquisitions of solution providers, including those in the 2008 VARBusiness 500 list, have shown no sign of letting up in the past year or so.

2008 VARBusiness 500 Home Page
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Overview: Growth Engine
EDS Top Level Performance
Movin' On Up
It's Not Easy Being Big
Business In The Fast Lane
All Together Now: Mergers And Acquistions
The Technology Of The VARBusiness 500
The Economies Of Success
Five VARBusiness 500 Myths

Activities surrounding the mergers with and acquisitions of solution providers, including those in the 2008 VARBusiness 500 list, have shown no sign of letting up in the past year or so.

Indeed, at least 25 of the VARBusiness 500 solution providers have either acquired or been acquired by other solution providers or investors, according to information gathered from a variety of sources by Everything Channel, the parent company of VARBusiness.

Those deals range in size from the $1.25 billion that Paris-based Capgemini (2008 VARBusiness 500 No. 6) paid for Keane International, to the $6 million that Incentra Solutions Inc. (2008 VARBusiness 500 No. 291) Boulder, Colo., paid for SSI hubcity (2008 VARBusiness 500 No. 433).

One of those deals, the $14 million acquisition of Midrange Computer Solutions Inc. (MCSI) (2007 VARBusiness 500 No. 365) by Minneapolis-based Datalink Corp. (2008 VARBusiness 500 No. 190) just over a year ago offers other solution providers a unique look into what goes into a successful integration. Both were storage-focused solution providers and shared many key vendor relationships, including Sun Microsystems, Inc., Santa Clara, Calif.; Symantec Corp., Cupertino, Calif.; EMC Corp., Hopkinton, Mass.; and IBM Corp., Armonk, NY. However, they served a geographically different set of customers and offered different services, giving the combined company a wider customer base and services offerings.

According to a Form 8-K/A, which Datalink filed with the SEC on January 30, 2007, just over a week before announcing the acquisition, MCSI had assets worth $26.6 million, including cash and cash equivalents of $7.6 million and current liabilities of $23.1 million.

For all of calendar 2006, privately held MCSI had product revenue of $42.8 million and services revenue of $12.3 million, giving it a total revenue of $55.1 million. MCSI that year also had a net income of $1.4 million.

About a year later, Datalink in mid-April reported earnings for the first fiscal quarter of 2008, which ended March 31, of $47.7 million, up from the $40.9 million reported during the first quarter of 2007. The company also reported earnings of $505,000, or 4 cents per share, up from last year's loss of $719,000, or 6 cents per share. The results treated the legacy MCSI results as if that company were part of Datalink for the entire quarter in both 2006 and 2007.

Charlie Westling, president and CEO of Datalink, said MCSI has provided a richer, deeper technical capability and customer base; stronger vendor relationships; increased services capabilities; and the ability to grow the business faster than was possible before the merger.

Datalink could make other solution provider acquisitions this year, especially those with a strong storage focus on integration experience and high-value services with the opportunity to expand into new geographies, Westling said.

"When you are in this business, you are always looking at the opportunities and challenges that you and others are seeing," he said. "We look at opportunities, at how they fit with what we're trying to do, how they affect the market, how it treats our employees. If those seem OK, then we can go into deeper discussions. We may not have just one discussion, but maybe several at the same time, with some falling to the side while others go forward."

Next: 2007/2008 VARBusiness 500 Mergers And Acquistions

2007/2008 VARBusiness 500 Mergers And Acquistions
The M&A trend shows no sign of letting up for solution providers

COMPANY NAME/
VARBUSINESS RANK
PUBLIC VS. PRIVATE ACTIVITY VALUE THE RESULT
Agilysys (#68) and Innovativ (2007 VARBusiness #136) Private Agilysys acquired Innovativ in July 2007. $100-$190 million Gave Agilysys a major Sun server and storage business.
Agilysys (#68) and InfoGenesis Private Agilysys acquired InfoGenesis in June 2007. $90 million Expanded Agilysys' enterprise-class POS business in the hospitality industry
Agilysys (#68) and KeyLink Private Agilysys sold its KeyLink Systems Group business to Arrow. $485 million Lets Agilysys focus on being a solution provider and paved the way for future acquistions.
Agilysys (#68) and Stack Computer Private Agilysys acquired Stack in April 2007. $28 million Gave Agilyssy a West Coast base and a major EMC partner.
Capgemini (#6) and Kanbay Public Capgemini acquired Kanbay in January 2007, but announced intent to acquire in 2006. $1.25 billion Reinforced Capgemini's financial services portfolio.
Capgemini (#6) and Software Architects (Sogeti) Public Capgemini acquired Software Architect, later renamed Sogeti, February 2007. $68 million Strengthened Capgemini's U.S. market for project management, architecture, technology and business requirements.
Citigroup-Transaction Services (#40) and Bisys Group, The (2007 VARBusiness 500 #63) Public In August 2007, the Investment Services Division of The Bisys Group became part of Citi, while its Retirement and Insurance Services divisions were combined with Crump Insurance Services to form Crump Group. $842 million The Bisys Group is now part of two larger companies.
CompuCom Systems (#54) and SaltSpring Software Private CompuCom acquired SaltSpring in March 2008. N/A Got Microsoft LAR (Large Account Reseller) status in Canada.
CompuCom Systems (#54), IIM Acquistion and Vanguard Managed Solutions (#382) Private In October 2007, IIM acquired CompuCom and Vanguard from Platinum Equity, then merged the two. N/A Combined outsourcing and managed services capabilities.
Datalink (#190) and Midrange Computer Solutions (2007 VARBusiness 500 #364) Private Datalink acquired MCSI in February 2007. $14 million Expanded geographic reach and services capbilities.
FusionStorm (#139) and Technology Services and Integration (TSI) Private FusionStorm acquired TSI in August 2007. N/A Got Cisco VoIP capbilities ad related services.
G&B Solutions (#493) and VSE Private VSE acquired G&B in April 2008. $19.5 million Expands professional services VSE offers its federal customers
Incentra Solutions (#224) and Helio Solutions (#285) Public Acquired Helio in August 2007. $10.3 million Gives Incentra a West Coast Sun Microsoft business.
Incentra Solutions (#224) and SSI hubcity (#433) Public Acquired SSI hubcity in September 2007. $6 million Gives Incentra a East Coast Sun Microsoft business.
Insight Enterprises (#28) and Calence (2007 VARBusiness 500 #412) Public Insight acquired calence in January 2008. $125 million Got a large Cisco practice.
Keane (2007 VARBusiness 500 #60) Private Keane was acquired by Caritor in Jne 2007, IT service provider. $854 million Global consulting, technology and outsourcing services.
Logicalis (#71) and Carotek Public Logicalis acquired Carotek in July 2007. $25 million Expanded Logicalis' HP business in the Southeast U.S.
Logicalis (#71) and Promon Tecnologia Public Logicalis acquired Brazil-based Promon in March 2008 and Promon's parent company acquired part of Logicalis' parent company. $160 million Expanded Logicalis' Latin America reach.
PC Mall (#60) and Sarcom (#157) Public PC Mall acquired Sarcom in August 2007. $55 million PC Mall added value-added services with the acquistion.
Presidio Networked Solutions (#69) and Solarcom Private Presidio acquired Solarcom in March 2007. $315 million Increased Presidio's Sun and Cisco products and services.
Sirius Computer Solutions (#85) and Strategic Computer Solutions (#276) Private Sirius acquired Strategic in September 2007. $99 million Brought Sirius new software and security offerings.
Softchoice (#78) and NexInnovations (#76) Private Softchoice acquired the technology solutions and products division of NexInnovations in october 2007. NexInnovations' break-fix services division continued under NexInnovations. $10 million Expanded Softchoice's ability to help customers select, acquire and manage software and hardware technology resources.
Strategic Technologies (2007 VARbusiness 500 #245) and Consonus (#261) Private The tow merged in January 2007, and was renamed Consonus in January 2008. N/A United Consonus, a high-availability data center and IT managed service provider, with STI, a provider of managed services and infrastructure solutions.
The TriZetto Group (#107) and Quality Care Solutions (2007 VARbusiness 500 #356) Public TriZettoo acquired QCS in January 2007. Intent to acquire announced in September 2006. TriZetto was bought by Apax Partners in April 2008 and taken private. $130 million Enhanced TriZetto's health-care payer industry solutions.
Wyle and RS Information Systems (#120) Private Wyle acquired RS in december 2007. $363.4 million Got a federal government integrator.
SOURCE: 2008 VARBUSINESS 500
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