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Channel Partners Asks: Will M&A In the Channel Pick Up in 2012?

October 13, 2011 - Article

“Yes there will be some consolidation. Some VARs may want to add a communications offering. Some communication agencies may want to add the technical skills to go after a more broad communications and technology approach. All will be searching for how to add value in the sales cycle."

—Clark Atwood, President, Concierge Communications , master agency


“I do believe there will be increased consolidation in the channel in 2012 but not for reasons specific to the industry. If you look at the M&A league tables, you’ll see that there is already a marked increase in M&A activity across many sectors and industries due to a host of external market conditions. On the buy side of transactions, one of the biggest dynamics for increased deal activity is being driven by interest rates. Cost of borrowing is at an all-time low which means companies that have free cash flow or those with strong borrowing power have access to capital like never before. Additionally, we are still in a deep recession and the contraction in spending makes organic growth for a company very difficult if not impossible. Spending money on revenue-generating activities like sales, marketing and advertising will not yield a proportional rate of return on that capital. This means that for a company with access to capital (whether their own or borrowed) to grow in these times, it has to consider growth through acquisition. They can acquire within their vertical to gain more critical mass or acquire for related diversification purposes to hedge against the down economy. On the sell side of transactions, owners of businesses will see the long-term capital gains tax rate of 15 percent (an all-time low) expire at the end of 2012. It is said to be moving back up considerably (to as high as 30 percent), which makes selling your business more lucrative than ever at this point. All of these market dynamics are essentially creating the perfect storm for increased M&A activity over the next 18 months."

—Dany Bouchedid, CEO, COLOTRAQ , master agency

“Absolutely, you are already starting to see it. There is a value in market share, and the larger partners are willing to pay a premium for a those revenue streams to best position themselves with the surviving carriers."

—J.R. Cook, Vice President – Agent Channel, EarthLink Business , carrier



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