I think the ratio is about right because there are opportunities in all three and want to grow them all. We are now the largest privately owned IT [reseller] company [in Australia] and probably third or fourth overall. Our objective is to be number one by volume.
Who do you see as your biggest competitors?
It depends which market segment you are talking about. From a size perspective it is obviously companies such as Commander but I don't think any of the top five or six players has our combination of infrastructure, professional services and software services. Size and being privately owned are key differentiators.
One of the first things I did [following the acquisition] was visit BCA's top 30 customers and I have been back recently to check on our progress. You have to understand there is going to be a bit of fear there because BCA had been around longer than Leading Solutions and we didn't play in the same space so they wouldn't have heard of us. We asked a lot of questions about why they dealt with BCA and when we went back it was really positive because they said those values hadn't changed. We haven't lost one customer. The most positive feedback was that people cared about their customers and that comes from both organisations being privately owned because senior management is never far away. That makes you more accountable and it isn't the case with some of our competitors.
What are your goals for the year ahead?
We have made a major investment in Victoria and NSW facilities during the past six months to help our people deliver an even higher level of service. We have a very aggressive growth plan and aim to be a $300 million business within three years. That means we need to find another $120 million from natural growth and continued acquisition. We are currently in the process of acquiring again.
Everybody is up for sale at the moment aren't they?
Yes, except for us. We have invested too much in the past 12 months.
Why is everybody up for sale when the market is so buoyant?
I'm not sure what the answer is but maybe the industry has been through such a difficult time in the past 2-3 years that people have had enough and think it is a good time to get out. I think it is a good time to get in because the future is strong if you have the right things in place. If you went back 10 years you could do an OK job and succeed but today that isn't enough. It comes back to economies of scale.
When you talk about acquisitions, are you looking across all three Leading Solutions business units?
Yes but the focus is on software services and our infrastructure business. On the infrastructure side 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. Perth is booming at the moment so that would be a hard one to get into but challenges are good.
There has been some consolidation in the local reseller channel during the past couple of years but probably a bit less than I expected. As somebody out there trying to acquire businesses, what is your perception?
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. 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.
Would you expect to see consolidation accelerate in the next couple of years?
Yes. As time continues, people are going to make less money unless they can achieve economies of scale and the pain points will become stronger. The challenge for some resellers is that most of their business comes out of one state and that is not a healthy long-term strategy. 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.
So do you think a lot of these tier two resellers are talking to each other about possible mergers?
I think they should be if they want to have a long-term future.
Do you see a long-term future in just selling hardware?
I have always had a different belief to a lot of other people. About four years ago everybody was saying there's no money in tin so get into the professional services space. I think there is a middle ground. You need to have both because the two co-exist. I have seen a lot of people get rid of their tin business and grow their professional services but then realise a lot of it had been driven from the tin. So I don't see a future for having just one or the other. Professional services alone has a better chance of survival but there's a good blend where those units drive each other and customers want somebody to own the whole thing.