IT Services Company Sparxent Seeks to Acquire Channel Partners

Using venture capital funds, two channel veterans target resellers in Dallas, Chicago and the east coast to better serve the mid-sized business customer with a channel business model that emphasizes consultation, integration and software development. First VAR in Newport Beach, Calif. is acquired. Up to eight acquisitions expected in next year.

August 26, 2008

Al Senia

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In a move sure to spark merger-and-acquisition interest in the channel, a new IT services company has been formed by two channel veterans who have set their sights on acquiring service providers active in the midmarket segment.

Dave Taylor, co-founder of the new Salt Lake City-based company named Sparxent, said it already has made its first acquisition, NetworkD Corp, a Newport Beach, Calif.-based VAR and the largest global reseller of LANDesk solutions. Sparxent also has signed a letter on intent to acquire Arbyte Group, a leading Microsoft partner based in Moscow and active in the Russian Federation and the Ukraine. Sparxent is working with vSpring Capital to fund the deals.

Taylor, who had a 15-year executive career at LANDesk Software and has held other positions at Intel and Microsoft, said Sparxent.is using venture capital funds to acquire solution providers in the United States and overseas who reach the mid-market, a segment defined as companies with as many as 5,000 users. He predicts an acquisition "every other month" with a total of six to eight during the next year.

"A lot of times VARs can disappear under the technology and get truly immersed in it," Taylor said. "And VARs often have only one piece of the technology to sell. We want to enable the customer to sit down and have a rich conversation about how IT can help their business." Taylor added that Sparxent will absorb each of the companies it acquires and combine consulting, software development, integration and other services into a targeted solution that is not dependent on a particular vendor or delivery model but integrates with the customer's existing environment. The idea is to operate Sparxent as an international umbrella company that positions itself as a single source for IT services and a "consultive ally" to midsize companies. Acquired channel partners will be able to retain their own identities.

Taylor's partner in the venture is Steve DeWindt, who is well known in the channel as former Intel channel executive, former co-president of European reseller Computer 2000, former CEO of distributor AmeriQuest Technologies and co-founder of Blue Roads. DeWindt went on the acquisition trail at Computer 2000 and Ameriquest and rolled up smaller regional distributors into those companies.

Taylor believes the time is right  for Sparxent to go after mid-sized customers via the VARs and independent software vendors (ISVs) who serve them. "With each new acquisition we make, we want to bring into our portfolio new geographies and new vendor certifications," he explained. Taylor expects that the majority of acquisitions will take place overseas, but says Sparxent also is targeting companies on the east coast, Chicago and Dallas in the U.S.

"The next few deals are probably not going to be a VAR, but a software development company," he said. "We don't want to just be a collection of VARs on a global scale." He added that software developers, hosting companies and managed service providers (MSPs) will be part of the mix.

Taylor added the ideal candidates for acquisition are channel partners that average between $5 million and $20 million in annual sales; have been in business for at least 10 years; have their original founders still on the management team; and can add technologies and geographic coverage to Sparxent's existing framework.

The first acquisition, NetworkD, has been in business 12 years; has more than 6,000 customers in the U.S. and Europe; and has deep LANDesk expertise.

"A lot of these channel solution providers are great companies and very successful companies. But what are their options going forward?," asked Taylor. "This is a way to harvest the value in their company. We'll bring to these VARs a leveraged event in the future by taking the company (Sparxent) public in three to five years. And service providers get much deeper access to capital."

(Al Senia is managing editor of ITChannelPlanet.com.)

TAGS: Microsoft,Intel,mergers and acquisitions,VARs,Sparxent

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