South African information technology group Datatec on Monday announced that it has acquired United States group Solution Technology for a maximum consideration of $15,7-million.
The $15,7-million consideration for the acquisition will be made up of $2,7-million relating to a profit warranty for the year to December 31 2004 and $13-million to be paid in cash on completion.
The profit warranty consideration, of a maximum of $2,7-million, will be payable on achievement of profit before interest and tax for the year ending December 31 2004 of $4-million, and will be settled — at Datatec’s option — in cash or through the issue of new Datatec ordinary shares.
Datatec has received South African Reserve Bank approval for the acquisition.
The group is funding the acquisition using group cash resources and may issue Datatec ordinary shares to the Solution Technology vendors. The effective date of the acquisition will be September 1 2004.
Solution Technology will form part of Datatec’s wholly owned subsidiary called the Logicalis Group. Following the acquisition, Logicalis US will have more than 350 employees and annualised revenues approaching $300-million.
The rationale for the acquisition is that Logicalis US has for the past 18 months been investing in growing its IBM business relationship to complement its existing technology partners, Hewlett Packard and Cisco.
IBM operates a geographically structured and authorised channel strategy, which raises the barrier for new entrants such as Logicalis.
The business of Solution Technology will enable Logicalis US to grow exponentially its IBM product and services business from about $10-million a year currently to almost $100-million.
“This scale and size would not have been possible to achieve through organic growth in the short term,” Datatec said in a statement.
Solution Technology employs 75 staff and generated revenue of $87-million for the 12 months ended June 2004 in its principal geographies: the states of Indiana, Illinois and Michigan.
Solution Technology will be merged into Logicalis US’s existing operations to become the Logicalis US IBM division.
IBM is extremely supportive of the transaction with Solution Technology, which will position Logicalis US as a significant IBM partner.
Solution Technology’s main operations are geographically well positioned to complement Logicalis US’s operations, especially in the midwestern region of the US. — I-Net Bridge