Compel paid £18 million to acquire Info'Products UK
Headline price £1 - has Compel overpaid?
Info'Products is paying Compel £18 million to take IP UK off its hands. The headline price is just £1 -- an indication of Info'Products' disastrous UK performance in the last few years, following the removal of IP UK founder Gerry Redman.
Compel puts it only a little more diplomatically in its shareholder circular: "The directors believe that the losses the business (IP UK ) incurred have arisen primarily as a result of management failures. In addition, the Board believes that these problems were exacerbated by the acquisition and mismanged integration of Simmons Magee PLC in early 1997."
Compel will repay £10 million worth of Info'Products debt, and in return it is getting £28 million worth of guaranteed net assets (presumably inventory and buildings). Compel has raised £5 million to fund the acquisition. And it will fund the ongoing restructuring costs of what is a still a heavily lossmaking company. Prior to the deal, Info'Products UK had 475 employees -- but it is currently undergoing an extensive redundancy programme.
Compel CEO Neville Davis said the group was unable to stem the redundancies but assured categorically that no jobs will be lost at Compel. IP UK has nine branches -- eight in the UK and one in Dublin (which brings Compel into the Irish market for the first time). The company has substantial offices in the City and Heathrow and a huge warehouse in Chelmsford -- all of which Compel is interested in retaining.
However, there is considerable overlap with Compel's geographic coverage. So plenty of scope for property divestment there. The deal will expand Compel’s turnover by up to 60 per cent –- if it manages to retain all Info’Products accounts.
Info'Products UK produced revenues of £170 million for the year to 31, December 1997. Davis is confident that the company will retain the vast majority of the business. "IP has little problem with service levels -- it's leadership and strategic direction that corporate customers are concerned about. We will supply both." The Info’Products UK deal places a question mark over the rest of the Dutch parent company Burhman’s computer operations.
Info’Products is –- or was -- Europe’s third biggest reseller (behind GE Capital IT Solutions and Computacenter), with substantial and profitable operations in France and the Netherlands. Substantial and profitable are the keys here -- IP UK was neither, ranking only four or five in the UK -- and with absolutely zero prospect of getting into the top three. Entex, the US reseller giant will have to find another UK partner for its One-Desk global alliance -- as Compel is a member of the rival GlobalServe consortium, which has Compucom as its US affiliate. Compel says it is happy to service OneDesk UK business "for a period of time".