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Leading hints at further acquisitions

Leading hints at further acquisitions

Having successfully swallowed market rival BCA IT, Leading Solutions is on the hunt for further acquisitions.

Already the largest privately owned integrator in the Australian market, with revenues of more than $180 million for the financial year to June 30, the Melbourne based company is now looking to improve the geographic coverage of its core infrastructure business.

"We are a major player in the states where we operate but are not in Perth, Adelaide or Canberra. It would be good to get a foothold in those markets," managing director, Frank Colli, said. "Perth is booming at the moment so that would be a hard one to get into but challenges are good."

In addition to almost doubling Leading's revenues, Colli said the acquisition of BCA had also delivered a strong customer base in major corporate organizations and TAFEs. Leading has traditionally been strong in universities, private schools, SMB and government.

"When we compared the top 20 customers from both companies there was no overlap. That's how nice the fit was," Colli said. "BCA also added break/fix facilities to conduct warranty repairs that Leading didn't have. It has some major clients in that space like ANZ Bank. Leading had reached a size where not having those facilities was starting to cause us some hindrance."

Looking back eight months after the acquisition, Colli said the biggest challenge had been merging the systems because Leading's were much more powerful in terms of sales and marketing but hadn't been designed to manage BCA's break/fix capabilities. Those modules are being rewritten and Colli predicted the company would be operating from as single system within three months.

Leading has also moved into new Melbourne and Sydney premises to help support aggressive growth targets. The company is aiming to achieve annual revenues of $300 million by 2010, which Colli admitted will require a combination of organic growth and further acquisition.

Although known primarily as a hardware specialist, he estimated the company now made more than half of its profits through professional services and a software division that includes bespoke development as well as the supply of ERP and CRM solutions. This was another area where Leading would target acquisitions but, as in the infrastructure space, Colli said many companies were up for sale but it was difficult to get deals done.

"The problem is that some people have unrealistic expectations based on emotion rather than business sense. A lot of companies out there have started from scratch so there is emotional attachment that can make negotiations difficult when it comes to money, conditions or how it has to happen," he said. "We are no different - I'm attached to the Leading Solutions name - but there's a market multiplier for what businesses are worth and you just have to take the emotion out of it."

Despite the often difficult nature of negotiations, Colli remains confident Leading will acquire again and predicted other channel players need to step up to the plate if they are to secure their long-term future. "The challenge for some resellers is that most of their business come out of one state and that is not a healthy long-term strategy," he said. "I think the number of tier-two resellers will diminish but there is an opportunity for some to step up to tier-one status. There are some gaps."


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