The actions of InterX last week are a clear indication of the changing nature of the channel in the UK and Europe. For InterX, which regards itself as a pioneer in the IT sector, the internet is the future. Since November, when it said it would separate Ideal Hardware from InterX and commit itself entirely to the internet, its share price has soared.
Meanwhile, Ideal has apparently recovered well from a difficult two years, during which its fortunes declined. It is now set for a takeover, merger or funded management buy-out (MBO) that will launch it as a pan-European challenger.
But 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, chief executive of Ideal. 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 latter option may well be what French prefers. Ideal is doing well now, but he 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 cash up-front.
No expansion without funds
James Wickes, chairman of InterX, told Computer Reseller News that 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 buy-out. So who are the firms with their eyes on European expansion? French dismissed speculation - mainly focused on Ingram Micro, Northamber and West-coast - 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. The company has built an excellent model. Graeme Watt, managing director of Computer 2000, believes that "after our own, they probably have one of the best setups in this country".
Acquisition by another distributor might mean that mechanism being dismantled and absorbed into another model. But a buy-out by a distributor is by no means certain, and part of the reason for this is the rules have changed.
Going direct is not the answer
French said Compaq and Hewlett Packard will soon realise that 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 are probably the only firms capable of exploiting the opportunities on a global basis now. Ideal has the model and understands the services, but it needs backing.
But non-distributor companies may 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 and what French calls "blue jeans" distribution, 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, have pushed the asking price for Ideal out of the reach of some potential bidders.
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