Merger creates new integration powerhouse

Merger creates new integration powerhouse

Future mergers remain very much on the cards, according to ComputerCorp chairman, Domenic Martino. The Perth reseller cemented a place at the tier-one table last week after joining forces with Melbourne's Leading Solutions.

ASX-listed ComputerCorp recorded revenues of $145 million in the financial year to June 30 and has 200 staff; Leading Solutions had revenues of $137 million for the same financial period and has 190 staff. "This is a much bigger acquisition than we expected," Martino said. "We want to make sure we've got our costs right. I don't think that will take long." If so, it will simply mean business as usual for ComputerCorp, which Martino said was initially formed with the idea of making a series of acquisitions when the time was right.

"We started off life that way and, by listing [planned] to really do an acquisition growth strategy," Martino said.

ComputerCorp has agreed to pay Leading Solutions $500,000 plus 177 million ordinary shares for at least $0.17 each - about $30.6 million - with more to follow depending on the merged entity's profit performance in coming years. The merger is pending shareholder approval.

Leading Solutions is no stranger to the acquisition trail, bedding down a buy of one of Australia's largest and oldest corporate resellers, BCA IT, in October 2006. Managing director, Frank Colli, has also previously flagged more merger and acquisition activity. The Melbourne reseller dusted off nine months of integration with BCA IT as the financial year ended. The company claims to have seamlessly integrated the two organisations as well as significantly boosting its overall products and services portfolio.

Martino didn't say which trading name the merged entity would use. However, the merger doubtless creates a national bloc of homegrown reselling power rarely seen in recent years - with expected revenue capacity of $300 million a year. Leading Solutions' Colli will head up the merged entity as CEO. Government, education, utilities, SMB and large corporate enterprise customers would be targeted by the new national business.

The merged entity would be looking especially to grow its services revenue - a goal on which Computer-Corp and Leading Solutions were united, Martino said. "We certainly see ourselves as targeting services growth, because that's where the margins and knowledge opportunities are as well," he said. "And last year, we did a big restructure [at ComputerCorp]. That was necessary, and it all costs money, but it's a slick, mean machine now."

ComputerCorp's preliminary financial report predicted a net loss of $17.8 million. It intends to raise $5 million for further capital and acquisitions. Frank Colli has also promised to procure another $2.3 million, according to an official ComputerCorp statement. Robin Rindel, the current managing director at ComputerCorp, will take on two roles at the new company - CFO and COO.

"Frank [Colli] and Robin [Rindel] were very thorough at looking at each other and what they bring to the deal. That's a good thing," Martino said Rindel had extensive skills from working in London and South Africa over the years, not least a considerable amount of financial and management nous and talent, Martino said.

"And Frank is really focused on sales and growth. It's quite a good merging of skills," he said. "This is a great opportunity."

Martino said the merger offered full national coverage. "We had our best operation in WA and were smaller in other states, whereas Leading Solutions was big in NSW, Victoria and Queensland. So this fits together beautifully," he said.

Martino said negotiations had started about six months ago and "got heavy" in the last 2-3 months. Leading Solutions had direct vendor relationships with the likes of HP, IBM, Toshiba, Lenovo and Lexmark - and is one of HP's biggest Australian resellers. HP solutions partner manager, Paul Robson, said HP had built a strong relationship with Leading Solutions and ComputerCorp over many years.

"Mergers and acquisitions are common in the IT industry today. And, while HP does not comment on our partners' internal business divisions, we will continue to support and work closely with them to maximise any opportunities," he said.

Rindel and Colli were not available for comment as ARN went to press. However, further details on the merger are expected within two weeks.

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