itX has acquired Dovetail Distribution for an undisclosed sum. Parent company, Rosser Communication, sold the niche security player because it was keen to get out of hardware distribution.
"Strategically, we didn't see hardware distribution as the place to be," company director, Tim Rosser, said. "We have had to write off stock in the past and it is hard as a small distributor to sign up the bigger vendors.
"You are always on thin ice with vendors being taken over or changing channel strategy and customers will shop around for cheaper prices." The buyout gives itX access to SonicWall and SnapGear products. Its existing relationship with Secure Computing would also be extended to cover Sidewinder G2 firewalls.
itX managing director, Laurie Sellers, said Dovetail's management had been one of several to approach him since he announced acquisition plans back in November.
Speaking to ARN at the time, Sellers said he was looking for a business that has concentrated on specialist products like security.
"It would ideally have about five or six core products that are generating about $10 million in sales," he said at the time. "Further growth requires cash flow and many companies find they can't break through. Maybe they would be interested in dovetailing with us."
While the ink is yet to dry on the Dovetail deal, Sellers said he was still in the market for further acquisitions.
"We have spoken to several other companies about potential deals but one wasn't a good product fit and another wanted more than we are prepared to pay," he said. "We are still in negotiations with a third NSW-based distributor and would also be keen to speak with businesses based in Melbourne or Brisbane.
"We have a presence in those cities but predominantly for sales and order-processing."
Four Dovetail staff will make the short trip to itX. But one man not making the journey is former Dovetail general manager, Max Fredericks, who has decided to branch into managed services under the new moniker, Dovetail Services.
"We will be looking to work with resellers because we know that business so well," he said. "We won't be selling them product but I believe there is an opportunity to provide managed services to dealers. It will make them more viable with their clients."
In the short term, Fredericks said he would be working to get through Dovetail's existing stock of lesser known vendors including AscenLink, Talaria X, Coyote Point and NetBox Blue.
In the last financial year, Dovetail turned over about $5 million.