More to come?
Could United Stationers’ recent acquisition of MBS Dev spark a round of consolidation in the US dealer technology sector?
United Stationers raised a few eyebrows last month with its acquisition of one of the US’s leading independent dealer technology solutions providers, MBS Dev.
United is paying $15 million for the Colorado-based firm, with up to a further $3 million payable dependent on the achievement of certain financial targets.
Both United and its rival national wholesaler SP Richards have been ramping up their partnerships with third party vendors (3PVs) over the last few years to integrate the 3PVs’ solutions into their own technology initiatives, such as Smart Search (United) and MyAnalyst (SPR).
One thing that has almost been a given in all of this is wholesaler neutrality, with both wholesalers saying that they want to provide technology solutions regardless of the software vendor.
Is this about to change with United’s latest acquisition?
No, if you agree with noises coming out of Deerfield.
"We believe that no technology solution in our industry can thrive unless it is truly wholesaler neutral," said United’s Jeff Kressmann in an email to OPI.
"MBS Dev is being run as a separate business unit without interference from United, with its current customer relationships and pricing intact," continued Kressmann.
United also says that the MBS Dev acquisition will help it establish a "learning laboratory" for e-merchandising and e-marketing best practices and that it will continue to work with "various industry technology providers" to integrate these best practices wherever they can help resellers grow.
That sounds good in theory, but it will be interesting to see how things develop over time and if the 3PV neutral standpoint is maintained.
MBS Dev’s former owners, Steve and Laura Guillaume, will continue to run the business, but United did not reveal how long they have been locked in for as part of the deal. If, or when, they do leave, this may signal a change in United’s technology strategy.
Until then at least, a "wait and see" attitude was one that prevailed amongst other leading 3PVs, who may have the most to lose by the MBS Dev acquisition.
ECi CEO Ron Books, Red Cheetah’s Steve Kahle, and Craig Greitzer of BMI all basically said that it was business as usual for them and that they would continue to work with both national wholesalers.
These reactions are perfectly understandable as none of the other 3PVs are likely to want to rock the boat with a key partner like United.
What this acquisition does show is that United has dusted itself down after taking a bit of a beating with its SAP Reseller Technology Solutions (RTS) project and means business with its technology offering.
And after making one acquisition, could there be more on the way?
MBS Dev is known for providing high-end solutions for larger dealers (though it does operate in other vertical markets which tie in with United’s jan/san and industrial supplies activities) and could be considered something of a niche product.
If United wanted to influence a wider dealer base it could go after one of the other 3PVs like BMI or Red Cheetah, for example.
What would that mean for rival wholesaler SP Richards which, until now, has been content to forge partnerships with the 3PVs for its technology solutions? Could we see SPR making a defensive play for one of the other 3PVs?
This was a strategy ruled out by SPR CEO, Wayne Beacham. In a statement to OPI he commented: "We have carefully reviewed an option such as this in our ongoing strategic planning process and have determined that at this time owning a software development company, in our opinion, is not in the best interests of office products dealers or SPR.
"Our primary reasons for this position are as follows: historically, ourselves included, systems development is not a core competency of distribution companies in our industry; secondly, we believe selecting a software provider and a wholesale partner that are one in the same clearly limits a dealer’s options going forward; thirdly, while it has been said that the MBS Dev solution will be wholesale neutral, we know if we owned a software provider for independent dealers we would tend to have a bias to leverage that system in ways that would best serve our own interests; and finally, it is our belief that many dealers would have concerns with their respective wholesale partner having visibility to so many aspects of their business."
Beacham added: "We are open to partnering with any solutions provider that can and will demonstrate neutrality and allow complete functionality of the industry leading content and search we have already developed."
There’s also the possibility of further consolidation amongst the 3PVs themselves. ECi has shown itself to be a consolidator down the years and could look to cement its market-leading position by further acquisitions.
CEO Ron Books says that company has just had its most successful fourth quarter ever in terms of sales of new systems.
"We couldn’t be more excited about our future, the direction of our software and our ability – with over 5,200 customers – to invest on behalf of our dealers," he said.
Read into that what you will, but don’t be surprised to see more M&A activity in the technology sector in the near future.