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Simply falls into Global Direct Mail's arms

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Analysis This article was first published in February 1999 In 1997, Simply Computers declared its intention of reaching an annual sales target of £130 million by June 1999, an ambitious aim considering the reseller was selling £70 million a year at the time. The east London PC builder also expressed an interest in floating on the stock market. What a difference two years make. Simply has been bought by US giant Global Direct Mail for an undisclosed sum. Presumably the amount was enough for Simply's venture capital backer, Alchemy Partners, to make a profit on its minority stake investment, made in 1997. Simply will now run alongside GDM's two existing UK subsidiaries, Misco and Global Direct, as an autonomous unit. The takeover was not necessarily what Paul Berry, executive chairman of Simply, would have wanted, judging from the email he sent to suppliers announcing the deal. He attributed Simply's problems on the implementation of a computer system, which had put 'a massive strain on the entire company and, in particular, on our cash flow. This has led to irregular payments, lower than anticipated sales volumes and generally strained our relationship.' This sounds more like a case for the contract lawyers, than for the M&A advisers. But it just goes to show how little room for manoeuvre there is in this sector when something goes wrong. Especially when you have a venture capital firm breathing down your neck. Let's not forget that in 1997, Alchemy Partners said Simply had enough working capital to achieve #130 million turnover targets. Much of Alchemy's money was used to buy out Simply co-founder Maria Knowles. How much went into the company and how much went the way of Knowles and other directors is a matter of speculation. The size of Alchemy's investment was not revealed at the time it was made in deference to Knowles' sensibilities. And let's not forget that Simply Computers is - or was - one of the UK's most successful off-the-page merchants. If Simply found itself struggling, what about the other direct boys out there? Last year, US direct giant Insight established a foothold in the UK market, by snapping up Choice, based in Nottingham. But there aren't that many US companies willing and able to buy up local mail-order resellers whenever the going gets tough. This year, things will get tougher. What are the odds of a high-profile collapse? As for Simply, it's business as usual. In his email to suppliers, Berry said he would continue at Simply's helm, with the support of his management team. How long he lasts will depend on how much interfering GDM gets up to, I guess. For Simply's story now belongs to Global Direct Mail. Group UK sales stand at $350 million, with internet sales reaching an eyebrow-raising $60 million. The decision to merge operations in some form will surely not be too far away. ®

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