"Whenever you see a successful business, someone once made a courageous decision."
Private Equity Key to Solution Provider M&A in 2015
The IT Supply Chain space in 2015 saw significant M&A activity, both in the number of deals and in deal valuations. With organic growth perpetually difficult, solution providers have turned to M&A to secure geographic presence or vertical expertise. This has been made possible in no small part by private equity and the increased role it is playing in financing and facilitating solution provider transactions.
In an analysis published today in CRN, martinwolf reviewed 21 North American VAR transactions to determine the extent of private equity participation. Our analysis suggests that fully two thirds of the revenue was accounted for by deals involving either a private equity firm directly or a portfolio company.
“Today, the dominant players in the market for VARs are not other IT solution providers, but instead private equity firms,” said Marty Wolf in the article. “What’s more, the number of these transactions is increasing. As private equity firms add IT solution providers to their portfolios, one of their first steps is often to use their initial investment as a platform for further expansion into the space.”
It’s a two-way relationship. While private equity advisors stand to benefit from investment appreciation, channel companies benefit from “a fresh perspective that is unburdened by ‘channel thought.’ Rather than worrying about maintaining vendor relationships, always a key priority for VARs, and doing things the way they have always been done, investors prioritize customer relationships and investment returns.”
As we begin 2016, expect private equity firms to continue to be a dominant force in M&A as they reshape the IT vendor landscape. Just yesterday, we saw the latest such example – Silver Lake’s $500 million investment in Symantec.
For the full article, and to see the highlighted transactions, click here to go to CRN.