Privately held resellers lose out in sale process

Privately held resellers are still the most attractive takeover targets in the UK, but some may be selling
themselves short, according to analyst firm Plimsoll.

The market watcher claimed 415 of the UK's top 640 IT resellers are still privately held and their values
are increasing faster than their public counterparts with factors such as exclusivity, niche product sets and tailored services adding to their value.

David Pattison, senior analyst at Plimsoll, said: 'Some of the smaller IT resellers are a little less business savvy and are not aware of what their company is worth. Particularly if it is a family-run business and
the younger generation is eager to sell quickly.

'Many private firms will strip out some of the profits of the business and take those as fees. This has the effect of devaluing the business and causing the owners to take a lower offer than the business is worth.'

Pattison said if the number of family-run firms continues to decline, the sector is in danger of losing the 'corporate stewardship and entrepreneurial drive' that has guided the channel economy over the years.

But on the flip side, more professional owners, despite increasing levels of debt and risk, could offer greater focus and drive that would benefit the company in the long term.

However, Mike Lawrence, managing director of VAR Bentpenny, said there was no right or wrong way of
trying to sell a channel business.

'A lot of firms do 'asset strip', but a lot of companies buy other companies for their order book and are not interested in anything else, particularly in what others would call assets such as IT and office equipment.

'Often this asset stripping saves the people that are buying a company a lot of trouble,' he said.

See also:

Strong market ahead for UK channel firms

Research finds that increasing numbers of channel players are heading into strong positions  25 May 2007

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