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Partners, Suppliers Weigh Pros, Cons of M&A at Channel Partners Evolution

Merger

Edward GatelyCHANNEL PARTNERS EVOLUTION — M&A is all over the channel right now, either through formal announcements, or rumors swirling among analysts and investors of upcoming deals.

Tech distributor ScanSource this month announced it will enter the telecom and cloud services market by acquiring master agent Intelisys.

In the meantime, TelePacific Communications’ acquisition of DSCI, to expand its capabilities and reach a nationwide audience, will be finalized any day now.

“The way we’re looking at it is one plus one equals three,” said Ken Bisnoff, TelePacific’s senior vice president of strategic opportunities. “The benefit for our partners is we get access to their UCx offering, their ITx offering, UC and managed IT services. The benefit they get is the scale, support and channel focus that we both have always had, [and it] makes for a seamless integration. Additionally, while this is occurring, we’re integrating SD-WAN into our nationwide network so that geographic boundaries are dissolving.”{ad}

At this week’s Channel Partners Evolution in Washington, D.C., Channel Partners asked attendees what they think of all the consolidation taking place in the channel.

Frank Lauria, vice president of sales and marketing at CSF, a toll-free provisioning provider, said he views M&A as a cycle.

“Smaller companies come up and they’re innovators; they either succeed in what they’re doing or they don’t, and if they don’t, they go away,” he said. “If they succeed, they usually are acquired by larger companies who then use some of their innovation in their product so they can grow. It’s kind of an ongoing cycle; it’s a positive thing for the industry.”

Some smaller companies do end up growing to become larger, but most end up either being acquired by or merging with larger entities, Lauria said. He views it as a way of introducing and gaining more momentum in the industry.

Jim Goebel, CEO of SoTel, a distributor of communications, networking and physical security products, said there’s consolidation and then there’s “forward-looking, revenue productive M&A.” Since 2012, SoTel has acquired four companies and is in the process of acquiring another.

“Were definitely in the latter because there’s a lot of opportunity in the whole space around cloud and recurring revenue,” he said. “I can think of no better definition of the word validation than …

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… someone coming along with a big check and saying, ‘I need to be in your business, and I can get there quicker by acquiring you than doing it myself.’ From a business perspective, it’s kind of the ultimate compliment.”

Matthew Amato, sales director of enterprise accounts at FatPipe Networks, a software-defined networking provider, said the lack of research and development is what concerns him about M&A.

“The less M&A and the more competition, that’s when DSL technology came out, progressive technology came out, cable providers did it, voice over IP,” he said. “When it starts coming down, my fear is they’re going to not want to continue to develop new products. And the need for bandwidth is only going to grow. How are we going to do it?”

Many acquisitions have occurred strictly to hold down or eliminate a competitor, Amato said.

“I look at some of the mergers, like three cable companies coming into one — what is that going to do to the end users?” he said. “Since they have a bigger buying power, will their pricing go down? Will their technology get better? Will their speed get better?”


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