ScanSource boosts cloud offering with $84m Intelisys buy

AcquisitionsCloud
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The good expansion news from the global distributor has come with a sales warning though

ScanSource is acquiring cloud channel services player Intelisys Communications. With 2015 gross commissions of $120 million, Intelisys distributes services for leading telecom carriers, cable companies, cloud service providers and technology partners through the channel.

ScanSource is a global distributor of technology products and solutions focusing on point-of-sale (POS), barcode, physical security, video, voice, data networking and emerging technologies.

Sales Warning

The acquisition is expected to close in the quarter ending 30 September 2016. Following the announcement of this deal, ScanSource announced that it expects fourth quarter fiscal year 2016 net sales to be approximately $880 million to $885 million, which is below the previously forecasted range.

Cloud-whiteboardScanSource will provide additional details about the sales warning when it reports fourth quarter and fiscal year 2016 results on 29 August 2016.

Craig Schlagbaum, vice president of indirect channels at Comcast Business, said of the Intelisys deal: “As we begin to see the bundling of hardware and software with networks and the cloud, our largest “master agent” partner Intelisys has been instrumental in helping Comcast Business build a scalable channel.

“With the combined strength of Intelisys and ScanSource, we expect outstanding customer and partner opportunities to result from bridging these two channels.”

Intelisys provides agents and VARs with a portfolio of services, support and enablement tools to sell cloud and connectivity services. The acquisition allows Intelisys to extend this model to the ScanSource VAR community, said ScanSource.

ScanSource VARs will gain access to Intelisys’ portfolio of connectivity and cloud services offerings, as well as the tools and platforms that help partners build recurring revenue streams, it said.

Under the agreement, the all-cash transaction includes an initial purchase price of approximately $83.6 million, plus earn-out payments based on earnings before interest expense, taxes, depreciation and amortization (EBITDA) over the next four years. Intelisys has demonstrated double-digit growth of net revenues and EBITDA, which is projected to continue during the four-year earn-out period.

“Intelisys is unmatched in the master agency space, and their two-tier model is an ideal fit with our culture and way of doing business. We are entering a high-growth, recurring revenue business that is complementary to our current business and represents a compelling opportunity for our VARs,” said Mike Baur, CEO, ScanSource.

Based in Petaluma, California, Intelisys has approximately 120 employees, more than 130 supplier partners, and over 2,400 sales partners. Upon completion of the transaction, Intelisys employees will join the Worldwide Communications and Services segment of ScanSource.

ScanSource has annual global sales of around $3 billion, with around 70 percent of that coming from barcode and security products, and the other 30 percent generated from communications – including video conferencing – and services. ScanSource sees cloud services, the government sector, 3D printing, chip and pin and other security segments as prime growth areas.

On the cloud, at the company’s recent Partner Summit in Malta, ScanSource worldwide president for barcode and security business Buck Baker, told ChannelBiz: “We’re still trying to figure it out. Some call it the cloud, but some may regard it ‘as-a-service’.

“Instead of paying up front or annually, you pay for something on a monthly basis, and that could be applied to parts of our business. It may be confusing for some of the sales teams out there but that is the way it is going.”

@AntonySavvas