By Seth Fineberg

Read this article at Accounting Today

Irving, Texas (July 26, 2004) -- These days you don’t need to be a technology mega-reseller like an Altara or Tectura to think about expansion through mergers and strategic acquisitions.

In fact, given the recent consolidation of major business application vendors, many small to mid-tier resellers are thinking more about where they want to play now and in the future. Moreover, they are discovering that organic growth is not always the answer.

“At some point they [smaller firms] are asking themselves, ‘If I can only invest X dollars and it will only raise me to Y, am I satisfied?” said Tectura chief executive Terry Petrzelka. “Partners of the past saw themselves maybe being a generalist. But you are no longer able to do that if you can finally say, ‘I can go out and get big deals of any size I want to.’”

It’s that perspective that is beginning to translate down to firms a fraction of the size of Tectura, a major Microsoft Business Solutions reseller that currently has 25 offices and 500 employees worldwide.

For nearly seven years, New York-based Best Software and Accpac product reseller Net@Work has been able to grow its business organically, adding products, staff and services as needed. Now, in the current environment, the nearly $7 million business felt that it was time to consider strategic acquisitions, not only to help themselves, but to help other small firms as well.

“Given all the consolidations going on with the manufacturers, there are resellers that are apt to compete in the same family, and it makes sense for them to join up with those who do complementary products,” said Net@Work co-founder Ed Solomon. “To build things from scratch takes time and it’s costly. It’s about selling a full solution, and that’s hard to do when you only have one product.”

Company co-founder and sibling Alex Solomon explained that the firm’s current growth strategy is simply about bringing in smaller resellers with a customer base that may be outgrowing them, or firms that have a “specific skill set and talent, primarily within the product lines we carry and in the
geographic area we serve.” Solomon also noted, “Most importantly, it’s got to be something that would be a good fit for them and us.”

Net@Work recently found its first “good fit” with the purchase of Lichtman Information Systems, a small but experienced Accpac Pro Series reseller from nearby Long Island, N.Y. Founder Shimon Lichtman admitted that even after 18 years as a developer and reseller, there is only so much he could do for his clients given his size.

“I know the Accpac product by heart and I can take care of nearly any problems my clients call me with, but there is only so much I can do in trying to maintain my own client database. It took away a lot of my time and capabilities of expanding,” Lichtman said. “I want to be able to grow as my clients are growing, rather than finding someone else to take care of a particular problem. Net@Work not only sells accounting, but e-commerce, customer relationship management and networking, and a lot of my clients need more of those solutions.”

Solomon said that his firm’s entire sales team is now structured to handle its current growth strategy in order to easily acclimate any newly acquired staff.


Helping the odd man out

NextLevel Information Solutions, another long-time Accpac product reseller, has also looked at the current environment and decided that growth through strategic acquisition would be its best path. Much like Net@Work, this now 28-person operation — thanks to its purchase of customer relationship management specialist Apex Business Solutions — realized that they could help themselves and other firms to grow through the right purchase.

“With the recent Best mergers, some of the smaller tech firms in the family will worry they will be the odd man out, and for us it’s a great opportunity to reach out to them,” said Manny Buigas, NextLevel’s vice president of sales and marketing. “In the Apex case, they are in a great market we’d love to expand into, and their technology expertise allows us to go after the ‘type A’ client that will assist us in growing strong.”

For a firm like SWK Inc., a Best Software reseller from Livingston, N.J., being acquired was more beneficial than doing the acquiring. The firm spent years trying to figure out the best way to grow, and finally found it through Trey Resources Inc., a spin-off from voice and speech recognition technology maker iVoice Inc.

Trey has a $10 million financing facility, and intends to use that to expand and acquire other companies. SWK president Lynn Berman believes that the acquisition, and the subsequent monetary infusion, will finally allow the firm to evolve the way that it wants to.

The firm expects that its staff of 16 will grow over the next year as it engages in new offerings, particularly for its latest venture. SWK, through a joint venture with bar code technology vendor Scanco LLC, has developed RF Barcode Master for Mapadoc — SWK’s proprietary electronic data exchange solution for MAS 90 and MAS 200.

“As a small or midsized company, it’s hard to grow organically. We evaluated getting private capital or merging into a CPA firm, but they didn’t always get what we were about,” Berman said. “Even with private capital, it’s a high price to pay as you accumulate debt and often give up control. We have the experience of seeing what else has happened in our industry, and this is the best step for us.”