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Opportunities and challenges: industry reacts to acquisition

Opportunities and challenges: industry reacts to acquisition

RESELLERS may feel the Ingram Micro acquisition of Tech Pacific in the pocket as their credit lines could be cut in half once the two firms join.

In addition, resellers will also have one less distributor vying for their business, which could mean fewer competitive options for similar products, while some vendors may feel unsettled in the new arrangement.

These are two implications industry sources expect the merger of the country’s two larger distributors will have for the New Zealand market.

“The biggest opportunities for us will be while they are changing all their systems to fall in line with Ingram Micro. It will be a tough job for them to keep their run rate while changing that big a business [as Tech Pacific],” says Paul Plester of Express Data.

Chris Rycroft of Dove Electronics says joining the systems of the two companies could be their biggest potential business challenge. However, Plester believes one of the greatest challenges for the new group will be ensuring that vendors enjoy the focus they require.

“The new company will follow a broad-based distribution strategy and many brands feel they do not get value for a broad reach approach,” he says.

The major impact on resellers will be a reduction in credit available to them.

“It could effectively remove half of their available credit,” says Plester.

Steve Macmillan of MPA agrees this may be an issue, but says it should not affect resellers that run an effective business.

“Not many resellers will be using credit from two sources to play a cash-flow game,” he says, adding that the channel will have fewer procurement options.

The merger will also create opportunities for other distributors to approach vendors, who may feel unsettled while the merger is being finalised, says Liam Gunson of research firm IDC.

“The transition stage of a merger normally causes some insecurities,” he says.

Macmillan agrees: “Not all vendors will be happy with the change and [some] will probably fall out.”

Overall, the surprise felt by channel sources was more over the suddenness and stealth of the move, than the rationale behind it.

David Charlesworth of Comworth Systems says he had been wondering who would purchase Tech Pacific as it had been on the market for some time.

“It is a logical and positive acquisition,” he says, adding the move should have a significant impact on the New Zealand market because Tech Pacific is such a major player.

“I am not sure it will change the dynamics of the market that much - there will still be specialist distributors and some of the smaller ones may change their thinking and consider partnering.”

Rycroft says the move makes sense on a global scale, as Ingram Micro did not have a footprint in Asia.

Microsoft New Zealand partner group manager Steve Haddock says the move is not surprising in light of the amount of consolidation in the ICT community at the moment.

“New Zealand is a small market, so consolidation naturally provides better economies of scale and better efficiencies - this is especially the case in distribution where massive efficiencies can be gained by increasing volume, while fixed costs remain constant.”


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