A few years ago, a college professor named Bob Dunikoski rode through the reseller market buying smaller resellers to make one large firm. Since then, the question of whether aggregating VARs really works has not been answered.
Consolidation seemed like the wave of the future in 2000. But CPA firm aggregation stalled, several VAR roll-ups never materialized, and the company Dunikoski built, called TexSys RD at first and now ePartners, struggled. The urge to merge is back. But will building national reselling companies work in this new round? There’s money out there betting they can.
Two players are racing to be the big kid on the block. Tectura, a Tempe, Ariz.-based company, had about $37.5 million in revenue for 2003, but recently jumped to a $60 million-a-year run rate with the purchase of Concord Business Systems, which had 25 employees, and boosted its size with the acquisition of Cosmo Consult, a German company with more than 230 employees.
But just as Tectura vaulted to a similar size as ePartners, which claimed $63 million in sales in 2003, the latter combined with EYT, a Chantilly, Va.-based company. EYT itself only recently merged with In2Gr8, a deal that always looked like an In2Gr8 takeover of EYT. In the latest round, the surviving company is called ePartners, but headquarters will be in Seattle, so it looks like that’s where the money is coming from.
How are EYT and ePartners doing? Both have had rocky times. Both say they are doing much better. Since they are private, we’ll have to take their word for it. But somebody has to help a bunch of venture capitalists recover their investment in the company.
Still the question remains, can any big VAR be truly effective? Aston Business Solutions and Columbus IT, both based in Denmark, aren’t exactly shaking up the world. The bank that holds the debt for both companies is looking for a buyer.
The other major player, InterDyn, remains committed to being more an alliance than one company. Together, InterDyn’s member firms have sales on the same order as Tectura. Like ePartners and Tectura, the alliance has expanded internationally. They are on similar paths.
These major firms are primarily selling Microsoft products and Microsoft probably wants bigger VARs. According to Howard Diamond, CEO of EYT, who now moves up to executive chairman of ePartners, “Traditionally, Microsoft has had more success with fewer bigger partners, than with larger numbers of small partners.”
And just maybe what we are seeing is a move towards a new order. As Diamond put it when he took over the EYT job, "Everybody is trying to find the right business model in this space."
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