Channel Insider content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.

You cannot cut your way to success, especially in a recession. Solution providers are increasingly looking at mergers and acquisitions as a means growing their base for the anticipated economic recovery. And there plenty of opportunities for growth through M&A, as demonstrated by a slew of activity in the last week.

SLPowers, a Florida-based solution provider, continued its acquisition activity by buying Guardian Angel Computer Services, a specialist in managed services and hosted electronic medical records. The deal gives SLPowers a larger footprint in the health care market and a presence in the Northeast through Guardian Angel’s Connecticut office.

“SLPowers is happy to welcome Guardian Angel’s clients to the SLPowers family,” stated Bob Hochmuth, SLPowers’ vice president of sales, in a statement. “And we are excited that Laura Steward, Guardian Angel’s CEO will be joining our leadership as Director of Healthcare Services. Her experience will be a welcome addition as our Healthcare SBU (specialized business unit) continues to grow.”

Giant solution provider Forsythe Solutions Group bought Paragon Solutions Group, a specialist in the convergence of physical and digital technology implementations. While Paragon is comparatively small to Forsythe, the Denver-based company with 20 employees provides Forsythe with the skills and resources needed for infusing intelligent technology into building and construction projects.

And New Jersey-based Melillo Consulting last week announced the appointment of Steve Tepedino as the company’s new president. Tepedino, a former president of Avnet, is charged with identifying M&A targets and bringing new technologies and capacity into Melillo’s portfolio. (Tepedino most recently served as president of ChannelSavvy, a consulting and training services for solution providers; ChannelSavvy is a partner of Channel Insider).

“I’ve worked in the channel my entire career, and vendors are relying on VARs now more than ever. Companies like Melillo Consulting that wisely invest time, money and people to create more value for their customers, partners and employees can thrive. I’m pleased to have the opportunity to participate in its success,” Tepedino said.

One of the findings from our Channel Insider 2009 Market Pulse research report was that the channel is splitting into two groups: those investing in growth through new technologies, geographic reach and customers and those who are cutting their expenses and hunkering down to ride out the recession. No surprise that those investing in growth expect to see revenue and profits increase this year despite all the economic challenges. Solution providers cutting spending and not investing in growth are expecting flat to lower revenues and profits.

Wherever I go, solution providers are talking about M&A activity. Either they’re looking to buy a company or looking to sell their company to a larger peer or vendor. While there isn’t a huge consolidation wave going on among solution providers, strategic investments are being made by solution providers with enough credit and capital to take on another company’s assets and resources.

My question: why isn’t there more M&A activity? With the economy suppressing revenues, decreasing customer opportunities and pressuring business valuations, why aren’t there more solution providers snapping up peers? Vendors are doing it, as witnessed by Oracle buying Sun for a relative bargain and EMC battle to steal Data Domain from rival NetApp. Comparatively, the level of frequency of solution provider M&A is low.

A few theories exist as to why there isn’t a larger M&A wave in the channel. What’s your theory?