Bechtle’s planned acquisition of Inmac Wstore from US parent Systemax, announced last week, marks a change in gear in Bechtle’s expansion strategy, which until now has predominantly concentrated on acquisitions in its largest DACH (Germany, Austria and Switzerland) region. Inmac Wstore is an attractive acquisition target for Bechtle. It is France’s largest online reseller and a top five channel partner overall by revenue, with 2017 sales of €419 million (US$474 million) and non-GAAP operating profit of US$25 million, or 5.3% of revenue, with over 400 staff. It has shown consistently strong growth in sales and profit, with a sales CAGR of almost 12% from 2012 to 2017. Operating profit grew 28% between 2016 and 2017. The deal also signals Systemax’s final departure from Europe, after selling off and shutting down the rest of its loss-making online resell division, Misco, following years of mismanagement and declining performance. Inmac Wstore, acquired by Systemax in 2009 as part of its ambitious European expansion strategy, has largely been sheltered from the problems suffered elsewhere in the business. Its success can be attributed to Systemax’s decision to maintain Inmac Wstore’s brand and management team, rather than integrate it into the wider Misco business.

Purchase terms have not been disclosed, and the deal is subject to agreement from the French workers council and regulatory approvals. But if successful, this would take Bechtle’s combined French business (on a pro-forma 2017 basis) from under €40 million (US$45 million) to close to €500 million (US$565 million), making France its second largest country operation after Germany. It would represent a major revenue boost to Bechtle’s online resell business, which generated revenue of €1.05 billion (US$1.19 billion) in 2017, around 30% of Bechtle’s total group revenue. Bechtle is already one of Europe’s largest online resellers, operating in a total of 15 countries under the Bechtle Direct and ARP brands (plus Buyitdirect in the Netherlands). But despite its aggregated size, at an individual country level Bechtle can still be a relatively small player. Germany, its largest country operation, accounted for just €308 million (US$348 million) or 29% of IT ecommerce sales in 2017. In contrast, Germany accounted for 87% (€2.2 billion) of revenue in Bechtle’s larger IT system house and managed services division. The remaining €745 million (US$842 million) in ecommerce revenue is split between the 14 other countries, each representing well under 10% of total group revenue, with the Netherlands and Austria most important after Germany. Inmac Wstore will make France the largest country for online sales, overtaking Germany by a sizeable margin. Its business model, combining online transactional hardware and software sales with sales advisors, aligns closely with Bechtle’s, and brings logistical, purchasing and sales efficiencies as well as substantial additional size, with both public sector and enterprise customers. But, in line with its acquisition strategy in DACH, Bechtle plans to maintain Inmac Wstore’s existing structure and management team. This will protect its culture and brand strength, while Bechtle seeks to maximize back-end synergies. This can be a challenging balancing act, but Bechtle has proven success with this approach.

It is significant that Bechtle has chosen to make its largest ever acquisition to drive the European expansion of its online resell business, rather than its much larger IT system house and managed services division. But Bechtle is addressing both strategic opportunities and challenges in its volume product business. It faces an intensifying competitive environment, particularly due to big US resellers, such as CDW, WWT, SHI and PCM, expanding their reach into Europe. Amazon’s business-to-business procurement platform, Amazon Business, represents a growing threat as it extends its reach across Europe. As a direct competitor to Bechtle’s own eprocurement business, its global reach, logistics capability and product breadth (beyond IT) make it a formidable opponent. A pre-emptive approach by Bechtle to boost purchasing volumes and geographic coverage is vital while Amazon Business’ country footprint is still limited. One of Bechtle’s advantages is its integrated relationships with multiple distributors to provide its online stores with competitive pricing, product availability and logistics across Europe. Distributors are increasingly recognizing the threat Amazon poses in the business-to-business space with its own logistics capability and are likely to welcome Bechtle’s counter-attack. As volumes consolidate into a smaller group of multinational players, size, reach and efficiency will be the defining elements of success. Bechtle has built one of the most efficient transactional sales platforms in the industry – its online resell division generates a higher operating profit (EBIT) margin (4.7% of 2017 sales) than its larger solutions business – but it faces unrelenting pressure on profit. Protecting this margin is a strategic goal. Inmac Wstore, which generates similar or higher operating margin, will be seen as vital to supporting that goal.

Another important dimension to this deal lies in understanding Bechtle’s cloud marketplace ambitions. Bechtle launched its cloud platform in Germany in July last year, aggregating public cloud software and infrastructure services, and is now expanding this across Europe. The business is still small and highly dependent on Microsoft Office 365. But this model closely aligns with online resell, particularly in software. Online resellers with established billing, CRM and marketing platforms have an advantage as momentum grows. Bechtle will see an opportunity to expand its cloud services portfolio into France, and target Inmac Wstore’s existing Microsoft customer base as it seeks to upsell new cloud services to these customers. Vendors such as Cisco are already exploring the options to develop this new route to market with Bechtle.

Finally, the deal benefits the companies’ joint vendor relationships, in particular with Dell EMC, HP, HPE, Lenovo and Microsoft. Bechtle’s importance at a European level with these vendors will be enhanced, particularly its ability to support multinational customers, while Inmac Wstore gains a more stable, committed and financially strong European parent. The Bechtle Group, second only in Europe to Computacenter in resell revenue, continues to go from strength to strength. Total 2017 sales of €3,570 million (US$4,034 million) were up an impressive 15% year on year, and it has maintained double-digit revenue growth since the start of 2018. Group operating profit (EBIT) has increased at a slightly slower rate, but this reflects Bechtle’s continued investment in growth, both in Germany and abroad. Adding Inmac Wstore will push Bechtle closer to achieving its goal of €5 billion (US$6 billion) revenue by 2020, and leadership in European IT ecommerce. Achieving this goal will require further investment, particularly in countries such as the UK, where Bechtle’s market share remains small. With this move, Bechtle has shown an appetite for larger-scale acquisitions, raising the possibility of further expansion. With Dustin, Infotheek and other European channel players showing their own ambitions to grow internationally, a new wave of multinational M&A activity may be ahead.

Receiving updates

Receive our latest PRs on emerging, enterprise and mobile tech delivered straight to your inbox.