Analysis This article first appeared in November 1998 Consolidation is picking up speed in the UK network reseller market, with Network Si and Anite Europe both falling to South African-owned companies recently. The latest merger - namely the marriage of Workplace and LanBase Holdings - is an all-British affair. And it's a big one. Workplace Technologies is paying up to £19.5 million in cash and shares, roughly equivalent to historic turnover for its smaller rival, which is on course for £24 million turnover for 1998. This would make a combined turnover of about £105 million. Keith Berry, founder and managing director of LanBase, is to join the Workplace board. 'This is our first acquisition and it is low risk. Lanbase is a good, solid growing business,' says Workplace managing director Andrew Vaughan. Post-merger, the group aims to leverage better purchasing terms from suppliers. Vaughan adds: "Workplace is 3Com's biggest UK reseller, Cisco's fastest growing UK reseller and, following the acquisition, the UK's largest Bay Networks reseller." It expects to achieve 'key operational synergies, such as training and stock management', and LanBase will deliver a big boost to Workplace's post-sales support business. Support contracts account for 20 per cent of LanBase turnover. Workplace is now the biggest UK player in the networking equipment reseller channel. Operating out of 11 branches in the UK and Ireland, it will have a workforce of more than 500. However, there's still some way to go before it matches rivals such as South Africa's Comparex Holdings and DataTec, or German-owned Siemens Networks for international scale. True enough, it does get a foothold in the Spanish market through the acquisition of outstanding shares of Madrid-based LanBase Espana not already owned by LanBase Holdings. This is a £3 million turnover business. To gain scale rapidly, Workplace would probably have to be bought by a better-capitalised company. Its takeover of LanBase - in common with the acquisitions of Anite Europe and Network Si - are merely the first round in a wave of mergers to come. Driving this are vendor pressures to integrate technology and customer pressures for integrated service. The reason that Datatec UK bought Bluepoint, a desktop infrastructure reseller, was to complement its Logical Networks networking arm. The drawing together of voice and data is not adequately reflected in the channel. Networking resellers will have to acquire - or be bought by - telecoms dealers. Also, the big product resellers are waiting in the wings. Specialist Computer Centres and Compel are underpowered in this area, although whether they could afford to buy a substantial networking reseller is another matter. Computacenter's networking equipment business could be worth up to £30 million if you throw in the cabling contracts. But this is puny in relation to its size. A quick and dirty acquisition would make all the difference. ®