Systems integration giant CompuCom and managed services superpower Pomeroy have entered into merger discussions to create a 15,500-employee, $3.1 billion solution provider behemoth, according to sources familiar with the situation.
The deal would bring together two channel mainstays with expertise in everything from IT outsourcing, end-user computing and help desk to network, data center and cloud. Both companies are owned by private equity, with Thomas H. Lee Partners purchasing CompuCom in April 2013 and Clearlake Capital scooping up Pomeroy in October 2015 and combining it with retail technology provider Tolt Solutions.
Combining CompuCom with Pomeroy would unleash a services juggernaut, according to one source with knowledge of the discussions who didn't want to be identified. CompuCom operates in North America and India, while Pomeroy has 25 offices in North America and 10 offices in Western Europe.
"Put these two companies together and you would have one of the pre-eminent product and services companies in this industry," the source said. "If they pull this off, they are going to be a big player. It's a good deal for Pomeroy and CompuCom."
Clearlake Capital and Thomas H. Lee Partners declined to comment, while CompuCom and Pomeroy didn't immediately respond to requests for comment.
Hebron, Ky.-based Pomeroy, No. 42 on the 2017 CRN Solution Provider 500, has sales of more than $1 billion and has thrived since joining forces with Tolt and becoming part of Clearlake, the source said. The company is laser-focused on providing managed services to customers with between 2,500 and 25,000 seats, CEO Chris Forman told CRN in 2015, adding he anticipated more consolidation in the channel.
"Clearly, customers are looking for single-source providers, and this a such a fragmented industry that most of the companies are either too small to scale or they're so large that they're inflexible," Forman said in November 2015. "Clients are looking for the perfect balance of both of those.
It's been a different story for Charlotte, N.C.-based CompuCom, No. 23 on the 2014 CRN Solution Provider 500, which has had four CEOs in the past four years and had its credit rating downgraded twice in the past two years by Moody's Investors Service.
"CompuCom is a good company, but they have too much debt," the source said. "That's the downside of private equity. It puts debt on the business."
Moody's had assigned CompuCom a B2 credit rating in July 2007 and held it there for more than eight years, but ended up downgrading the rating to B3 in September 2015 and again to Caa2 in June 2016. CompuCom's capital structure may be unsustainable, Moody's said last year, due to the company's elevated leverage and deteriorating business performance since becoming part of Thomas H. Lee Partners.