Industry consolidation continues
Components and peripherals distributor VIP Computers is to merge its operations with Realtime Distribution as market consolidation continues throughout the channel.
Enthusiast gaming components distributor RealTime, which was previously acquired by VIP, will now be branded under its parent companies logo. VIP Computers will continue to operate from its existing Warrington and Huntingdon offices.
The merger will see the business operations of the two companies combined, with the appointment of Richard Marsden as sales director, while Duncan McAuley will become purchasing director.
Realtime managing director Mark Reed will leave his current role at the start of 2013 as part of the merger.
Chairman of VIP Computers, Jatti Sahni, said in a statement that by aligning its business more close with Realtime the company will strengthen its position in the channel.
“This merger will cement our position as a major and much stronger components distributor within the UK market,” Sahni said. “It will also ensure we maintain our competitiveness and deliver better solutions to our customers”.
The distribution space has seen plenty of mergers and acquisitions recently, with the likes of Avnet, Ingram Micro and Tech Data all expanding their businesses.
Through mergers and acquisitions, distributors are extend their reach in the market, with Ingram Micro for instance making a move further into the mobility space with its recently closed deal of BrightPoint, which allows them find higher margin sales when core businesses are being squeezed.
According to Canalys analyst Alastair Edwards, shifting trends in the industry and the wider economic climate are causing the pace of consolidation in distribution to increase.
“There has been a lot of M&A activity in the past three or four years, and we are seeing an acceleration of that in the past 12 months,” he told ChannelBiz UK.
“Distributors are under a lot of pressure because of the economic climate,” Edwards said, “the economic situation is a big contributor to this trend [of consolidation].”
With ongoing consolidation in the market there it means that distributors outside the top five or six are likely to follow suit, either to become more niche or to merge with other players in the market and give themselves a bit more size.
This can give advantages in relationships with vendors says Edwards. “The challenge is a lot of vendors are looking to consolidate their distribution partners,” Edwards said, “so if they don’t have a really strong and efficient business model for the vendors they are going to struggle to remain part of that consolidated world.”
However he says the good news for big players like VIP operating on a national level, which are forced to contend with the distribution giants further expanding their presence, is that they are able to provide an alternative to vendors , with many seeking to secure alternative avenues of distribution.
Duncan McAuley, purchasing director for VIP Computers, commented to ChannelBiz UK: “The macroeconomic situation has affected the IT distribution market in the same way it has affected other markets. The market is ripe for further consolidations as only the strongest will survive. We expect further consolidation to take place at vendor and distributor level over the next six months, and VIP’s recent merger with Realtime Distribution has been orchestrated to ensure that we are in a very strong position for the components market over the coming years.”