InterX and Ideal Hardware face up to the future

Ideal Hardware and its parent company InterX have made interesting reading over the last six months. For InterX, which regards itself as a pioneer in the IT sector, the internet is the future. Since November, when the company said it would separate its distribution arm, Ideal Hardware, from InterX and commit itself entirely to the internet, the firm's share price has soared.

In the meantime, Ideal has apparently recovered from a difficult two years, during which its fortunes declined. The company is now set for a takeover, merger or funded management buy-out (MBO) that will launch it as a pan-European challenger.

However, the book remains very much open on which option it will take. There are at least three serious contenders for acquisition, according to Ian French, Ideal's chief executive. The indicators are that one of these is a US company with no significant European presence, one is a European distributor, and the other is a financial company, keen perhaps to fund an acquisition programme in Europe.

This third option is what French prefers as he maintains that Ideal is doing well now, but does not feel the job is finished. "Ideal is in a very good position to be an acquirer and lead the consolidation in Europe," he said.

A venture capital-funded deal, however, might not mean an outright takeover but a funded MBO instead. The interests of the InterX board are slightly at odds with this position. A funded MBO would almost certainly mean less money upfront.

InterX chairman James Wickes said more money will be needed to fund the expansion of IT Network. If bidders for Ideal put enough money on the table, the InterX board would have to concede to a buyout. So who are the firms with their eyes on European expansion?

Eyes on the prize
French dismissed speculation, mainly focused on Ingram Micro, Northamber and Westcoast, as being well wide of the mark, and Tech Data already has a strong European presence, so is unlikely to bid. In distribution this leaves few candidates. Actebis and Arrow may be in the frame, but that is just speculation.It may not be in the best interests of resellers if another distributor buys Ideal.

Acquisition by another distributor might mean that mechanism being dismantled and absorbed into another model. But a buyout by a distributor is by no means certain, and part of the reason for this is the rules have changed.

French said Compaq and Hewlett Packard will soon realise the answer to the Dell problem is not to go direct. "They have to take cost out of the supply chain, but they don't need to go direct to do that because we can plug the whole of that chain together for them," he said.

Distributors will serve vendors as much as they serve resellers in the future, running slick, expert logistics and services operations. Tech Data and Ingram Micro are probably the only companies capable of exploiting the opportunities on a global basis now. Ideal has the model and understands the services, but it needs backing.

However, non-distribution companies could be involved in that consolidation. The driver for these changes is the internet. Investors are placing bets on what will and will not work in the future. A financial company eager to invest in the future of distribution, or even a manufacturer conscious of the importance of logistics are also potential candidates.

Another important factor here is the share price. Optimism about the prospects for the internet side of the business and Ideal's recent performance have pushed the shares up again. This and the recent good financial results has pushed the asking price for Ideal out of the reach of some potential bidders.