Datatec`s system integration division, Logical, has bought New Zealand`s largest reseller of IBM high-end systems, making this the group`s first acquisition in eight months, although it is rather small compared with deals it has done in the past.
The group said in a statement that the newly formed company - Logical CSI - would be the only company in New Zealand delivering this range of end-to-end solutions, bringing Logical NZ into line with international Logical operations which have a broader focus on consulting and services across the board in both IT and telecommunications.
Jens Montanana, Datatec CEO, says about US$1 million was paid for the company, which has a turnover of US$15 million, and this was self-funding using Logical New Zealand`s own resources.
"This was not a big acquisition, but it does give us a large slice of the New Zealand market and it jump-starts our presence there," he says.
The purchase also brings Logical`s New Zealand operations into line with Datatec`s other overseas companies, especially the US.
"About 50% of our business now comes out of the US and there we have developed very close ties with infrastructure players such as Hewlett Packard and IBM," Montanana says.
New Zealand`s isolation from the rest of the world has been a blessing for its IT sector as it has been insulated somewhat from the turmoil seen in Europe and the Americas. "The IT sectors in Australia and New Zealand have not seen the downgrading that many other countries have."
Montanana says another key reason for the purchase was that the previous shareholders were in distress, while the underlying business was still strong. "The shareholders had got themselves into a bit of a pickle by over-exposing themselves to debt, but the business itself is sound. This is not an unusual situation within the IT industry."
He says Datatec has changed its strategy from one of growth through acquisition to focusing on organic growth, fixing its business models and ensuring that its various units become cash generators.
"With the international IT industry shrinking by about 30% since the Y2K heydays of 2000, it is better to be part of a larger group," Montanana says. "There are a lot of good but small companies that we can simply 'bolt on` to our business with minimal acquisition costs, but we are able to provide them with a stable environment with which to get on with their business."
In the half-year to September, Datatec`s headline earnings plunged 91% to R17 million on revenue of R10.7 billion. The group has three main divisions: Westcon is its international distribution arm with operations across the globe, although it is not represented in New Zealand; Logical is its integration company; and Mason is the UK-based consulting company.
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