Acquisitions in the integration channel have usually been associated with achieving geographic expansion and faster growth. But chronic industry skills shortages are becoming a significant factor.
ComputerCorp managing director, Murray Mansell, said its current acquisitions strategy was fuelled by improving its skill set. Increasing demand for quality sales and engineering skills triggered its recent purchase of Melbourne integrator, Fed IT.
"Skills are a real problem and a prime motivator for us," he said. "This time [with Fed IT], we were really buying resources."
Historically, ComputerCorp has acquired companies to establish a national footprint. Mansell said this changed when it purchased Tasmanian IT procurement and services company, Xite, in April last year.
"Xite was the first time we looked for more than just buying a presence," he said. "We were organically at a point where the skills shortage was starting to hit. It wasn't so much about engineering skills as trying to find the right sales staff."
Mansell said a need for business development managers also prompted the search for a suitable purchase in Canberra. It acquired CES Computers in October. The deal gave ComputerCorp the ability to target government and large corporates.
Now engineering resources have come into the equation.
"With solutions such a catch cry today, the shortage has become more pronounced," Mansell said. "The price being paid for engineers and architects is exorbitant."
ComputerCorp was also acquiring to build services skills faster, Mansell said. The company's traditional strength was procurement but it made a decision to branch into solutions about 12 months ago.
The WA-based company is now seeking more acquisitions in Queensland and South Australia. Mansell said it identified vertical market skills along with project management as crucial. Desired skills included Cisco, StorageTek or IBM storage competencies.
BCA IT has also borne witness to the shortage of quality solutions sales skills. While they were out there, managing director, Stephen Harrington, said wooing business development managers was a difficult and expensive process.
"You've got to have good back-end infrastructure and delivery mechanisms in place," he said. "You have to be able to sell them the story that you can deliver. The hardest thing is to convince them to trust you."
Despite the difficulty in acquiring sales staff, Harrington said BCA would not pursue mergers or acquisitions to improve its skill base. However, it had been looking for opportunities to buy or merge in order to sustain growth.
"The market is fairly buoyant and there's plenty of project activity. We're happy with our lot, but we would look to drive cost efficiency, get scale and remain profitable in terms of continuing to grow the business," he said.
"There are not a lot of targets that fit with our business and can add scale overnight. The good ones don't necessarily want to be purchased as they're making money."
While the idea of buying skills sounded like the obvious solution, Data#3 CEO, John Grant, said successful integration was a difficult thing to achieve. The Queensland-based company tried its hand at aggressive growth several years ago, acquiring seven companies. It was considering future purchases.
"The thing you have to remember is that skills are mobile - we're talking about people, not assets," Grant said. "It sounds good, but it's reliant on the success and implementation of the merged strategy. If you're unable to get a 100 per cent outcome, you are losing skills you paid good money for. "With our previous acquisitions, we have not done the best job in that we did not achieve the optimum outcome."
Among Data#3's criteria was the need to ensure the company being bought had a compelling reason for joining forces with a larger party.
"You have to look at the leadership within the company, the rationale for selling and how this will affect the people working for them," Grant said. "If they just want to exit, it's a big problem. Ideally you want them inside the business to help build it."
Other factors were long-term financial sustainability and IP assets.