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Editorial: Business as usual?

Editorial: Business as usual?

A small article buried in the market wrap section of the Australian Financial Review last week claimed CVC, the venture capitalist firm that owns a controlling share of Tech Pacific, had hung for sale signs around the neck of the region’s biggest IT distributor.

While such news is certainly of great interest to the channel, it can hardly be seen as a great surprise. Business at this end of the market has no emotional ties and it is only natural that an organisation making its money from buying and selling companies would test the market from time to time.

The most significant aspect of this development was the price tag. When CVC paid Hagermeyer about $200 million for a 58.5 per cent share at the end of June last year, the deal valued Tech Pacific at $345 million. The asking price less than a year later has soared to about $600 million and possibly more — a tidy little return on investment if anybody decides to bite.

That number, while it is probably little more than an exercise in asset evaluation, is a reflection of the way Tech Pac has performed in the past 11 months. And the Singapore-based CEO of the Tech Pacific Group, Shailendra Gupta, said that comparing its performance with Asian or global multiples would lead to an even higher valuation. Given that Tech Pacific management still holds a 10 per cent share in the company, another sale would be warmly welcomed in the boardroom.

According to Gupta, the Tech Pacific Group is extremely profit­able and has seen high double-digit growth in sales and profitability for most countries where it operates, including Australia.

It seems things are a far cry from the slide the distributor suffered around the turn of the century when it lost the head of steam it had built up in the mid- to late-90s. That momentum has returned since 2001 and Tech Pacific has widened the gap to its nearest rivals, according to Gupta. In fact, he claimed that the biggest and best distributors across the world would like to be meeting the benchmark it is setting.

With that in mind, it is hardly surprising to hear that CVC is floating a number to see if the market has been impressed by the distributor’s continued improvement.

It is also important to remember that the sale of Tech Pac last year attracted a lot of attention among resellers when, in the end, it had no noticeable effect on the way the company did business with its customers. The money men playing these venture capital games have no interest in trying to influence the way a company operates, as long as it continues to hit the growth targets they have set, and there is no reason to believe that there would be any change to local operations if the group was to change hands once more.

When the news broke last week, Tech Pacific Australia managing director, Kerry Baillie, sent a memo to staff saying it was business as usual.

This could be read in two ways — a dismissal of the initial report or a reflection of his opinion that it would have no effect locally. Either way, he will almost certainly be proved right. What do you think?

Brian Corrigan is Editor of ARN. Reach him at brian_corrigan@idg.com.au


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