CDW’s acquisition this week of Midwest VAR Berbee Information Networks for $175 million is a sign of things to come. The online volume reseller plans to make more acquisitions as it seeks to expand its solution and services capabilities.
Berbee, one of the nation’s largest solution providers, adds network infrastructure, unified communications, storage, security and managed services capabilities to CDW, enabling the Vernon Hill, Ill., reseller to capture a larger share of customers’ wallets, the company said in a statement.
More such acquisitions are likely, said John Edwardson, CDW’s chairman and chief executive officer.
CDW intends to add companies with solution or service offerings complementary to its own for which it can widen the market to a national reach, he said.
“If you look at the product categories we have, we are at the bottom end of the server, storage and router-switcher line,” Edwardson said of entering the solutions and services space. “Many of those applications developed at the top are being migrated to smaller companies. We believe those developed for the biggest companies will be moved downstream, and we want to be able to do that.
“There are literally hundreds of companies around the country founded 15, 20, 25 years ago whose owners are looking for an exit strategy,” Edwardson said. “That presents an opportunity for us to grow this particular segment of the business.”
Analysts and VARs who follow CDW’s doings are not surprised the company is planning more acquisitions.
“We believe the acquisition is just the first in what could eventually be a series of acquisitions by CDW,” said Bob Gruendyke, a research associate with Raymond James, a financial analyst firm. “CDW management touched on the successful acquisition history of Berbee management, and the fact that Berbee’s top three executive officers are staying on board suggests that CDW will eventually make acquisitions similar to Berbee in order to round out its enterprise solutions offerings nationwide.”
CDW management set a target of $10 billion in annual sales by the end of 2008, and the company remains about $1.7 billion in forecasted sales below that figure, even with the Berbee purchase, Gruendyke said. CDW reported $6.29 billion in revenue last year.
The strategy is similar to one Berbee itself has used to expand its reach already and will likely continue under CDW’s ownership, said Paul Shain, Berbee’s CEO.
“The vision has been a regional approach moving forward,” Shain said. “Our view was to find great companies with one or two product areas and bring our portfolio to them.”
Based in Madison, Wis., Berbee has 11 offices and two data centers in six Midwestern states and employs approximately 800 people. The company’s revenue for the year ended July 31 was $390 million.
CDW’s resources should be able to double that figure in five years, Edwardson said.
For CDW, Berbee is expected to expand CDW’s customer base (approximately two-thirds of Berbee’s customers currently are not CDW customers), create new cross-selling opportunities, accelerate CDW’s solutions capabilities and expand the market CDW can serve to include higher-end products and services.