S Central, ComputerCorp and Synergy Plus will join forces under one listed IT integration powerhouse, as part of efforts to tackle the midmarket integration space. But an analyst claims the organisation will face tough local competition.
Last week, S Central purchased a 30 per cent stake in ASX-listed ComputerCorp, making it one of the largest single shareholders in the business.
The deal coincided with ComputerCorp’s acquisition of Synergy Plus from listed player, Hyro Limited, for $9.3 million.
S Central managing director, Peter Mavridis, said the union was about establishing an integration player comprehensive enough to provide end-to-end solutions.
“There’s been a gap in the market with the demise of Commander – other than Data#3, there really isn’t anyone playing in that mid-market space,” Mavridis told ARN. “We’ll be starting with $250 million in combined annual revenue and plan to grow that.”
Frost and Sullivan analyst, Andrew Milroy, saw synergies between the businesses, but said the united group would come up against stiff competition in the mid-tier space.
“Commander did leave a gap, but lots of people have been picking at that carcass,” he said. “There are a lot of organisations playing in that space – Dimension Data, Gen-i, Data#3 and so on.”
ComputerCorp CEO, Robin Rindel, will become the combined entity’s CEO and be responsible for the operations side of the business. Mavridis will join the board of directors and take on a newly created role as executive director of strategy, as well as focus on further acquisitions.
The group will either be called S Central or list under a new brand, and retain 330 staff, including 160 engineers and consultants, across Australia. The companies are hoping the deal will be completed by May 1, subject to shareholder approval. Mavridis said there was little overlap in terms of customers or skill sets.
The union was fuelled by Hyro’s decision to offload its Synergy Plus subsidiary. ComputerCorp picked up Synergy’s IBM infrastructure business including midrange server and storage solutions, related managed and hosting services and maintenance contracts, as well as the Synergy Software Holdings division.
The $9.3 million purchase price is payable in cash over a three-year period and dependent on Synergy’s profit performance. The minimum purchase price is $6.5 million.
Hyro CEO, Bill Votsaris, said the decision to sell Synergy was part of a broader review of its business. Hyro will retain Synergy’s application development, IBM application software consulting and application managed services business. It will also offer infrastructure services via an ongoing partnership with ComputerCorp and other providers. Votsaris is a director of ComputerCorp and founder of Synergy Plus.
While S Central will provide most of the technical engineers, Mavridis said Synergy’s IBM expertise would give the combined group a leg-up in that market.
ComputerCorp’s Rindel also highlighted skills across virtualisation, unified communications and storage as critical in building a mid-market business. He claimed a quick and streamlined integration plan will be key for the newly merged organisation. As well as the challenge of integrating the three businesses, S Central has also made multiple acquisitions in the last 12 months.
“The immediate step is to get the deal concluded, as there are a number of conditions to be met. Then we will go through the transition and integration plan, implement common systems, and so on,” Rindel said. “We want to be in position by the end of June and go forward into the new financial year with a complete suite of offerings.”
He said market conditions were tough, but claimed a quick integration plan could create opportunities.
“Systems can be a big issue, but it’s also where the efficiencies are,” he said. “It is tough out there, but we have a strong sales team at ComputerCorp.
“If we can integrate and execute on this quickly, there are opportunities to get leaner and consolidate our offerings – when things turn around, we can capitalise on that. This deal transforms our business.”
Mavridis waved aside concerns of the impact of the economic downturn on revenue or the acquisition. He personally contributed $5 million in convertible notes as part of the deal.
“This is the best time to do up a brand and build customer loyalty,” Mavridis said.