CompuCom, one of the United States’ most well-known resellers, will be gaining a significant foothold in the Canadian market through the acquisition of General Electric’s IT Solutions unit.
Employees at Mississauga, Ont.-based GE ITS were informed late last week about the acquisition, which is being conducted by Dallas-based CompuCom’s corporate parent, Platinum Equity. CompuCom was acquired by Los Angeles-based Platinum Equity last month. Financial terms of the GE IT Solutions deal, which Platinum hopes will clear regulatory hurdles and close by the end of the year, were not disclosed. Organizational changes have not been announced, but it’s most likely the combined entity will be managed by Jim Dixon, whom Platinum appointed president of CompuCom a few weeks ago.
CompuCom boasts a number of Fortune 1000 clients, including General Motors, Boeing, Delta, Zurich North America and Bristol-Myers. About 1,600 of its approximately 4,400 clients are categorized as large enterprise, representing industries such as banking, aerospace, oil and gas, state and municipal governments. GE is a supplier for the Canadian National Master Standing Offer, which provides the firm important relationships as a reseller and integrator with the public sector. GE has about 300 staff in Mississauga and employs 1,700 around North America. CompuCom employs about 3,500.
Platinum Equity spokesman Mark Barnhill said the company had been looking for dozens of potential partners following its takeover of CompuCom. He said there would be a number of synergies with GE ITS.
“”Compucom is much more desktop-focused from a product standpoint and even a service standpoint, “” he said. “”GE tends to be more on the network side and the server side. We think the consolidation of those businesses really provides cusotmers with an end-to-end integrated IT solutions provider that we think will be good for customers of both.””
CompuCom and GE ITS are merging at a time when market analyst firm Forrester Research is forecasting only moderate growth in the IT sector. In projections released this week, Forrester analyst Andrew Bartels predicted U.S. IT spending would rise seven per cent next year. In Canada, that number is around four per cent. That doesn’t necessarily mean the reseller market will get smaller, he added.
“”I don’t see anything in the environment that would suggest we’ll see consolidation accelerate,”” he said. “”There’s enough growth going on that existing suppliers will remain stable.””
Barnhill said Platinum wasn’t worried about the long-term outlook for IT sales in North America.
“”It may not be recovering as quickly as some had predicted or hoped, but it is moving in the right direction,”” he said. “”We believe these are two terrific companies that have demonstrated an ability to succeed whatever the market conditions. I mean, in 17 years of its existence, CompuCom has been profitable every single year. GE is a very well-managed and profitable enterprise as well.””
At one point, GE was busy executing its own acquisition strategy, buying up several smaller firms including Brunswick Micro Systems in Eastern Canada, Aardvark Consulting in Western Canada and Ottawa-based Opcom Solutions in the late 1990s. In 2000, it sold off its configuration assets to Ingram Micro, along with an outsourcing arrangement that saw the distributor taking over most of the product-oriented side of GE Information Technology Solutions’ business. This included product procurement services of hardware, software and personal computer products; logistics and order management; and fulfilment. The idea was that Ingram’s help would leave the large reseller free to devote more of its resources to technical services and consulting.
Barnhill said Platinum, which has acquired approximately 50 firms over its 10-year existence, has depth of experience in what he called “”corporate carve-outs”” — taking over the division of a larger corporate parent and establishing it as a standalone entity.
“”We know how to do this. We have a lot of experience in doing this,”” he said. “”We think that experience will allow us to transition both Compucom and GE and to integrate those business that minimizes any disruption to customers.””
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