The saga of solutions provider NexInnovations has come to an end with the purchase of the company’s products division by Softchoice for the bargain basement price of $10 million.
The deal ends the almost 30-year history of the largest IT reseller in Canadian history. It is still subject to court and regulatory approval.
Softchoice has agreed to buy the assets associated with the NexInnovations product business. This includes customer relationships and records along with certain assets. Softchoice also confirmed that it will be hiring key employees associated with supporting that business.
Dave MacDonald, the president and CEO of Softchoice, cited margin pressure as the main reason why the solution provider fell into financial difficulties.
For more on the story behind Nex’s fall, see Former NexInnovations CEO claims Tech Data caused the company’s downfall on page 4.
MacDonald added that Nex’s business model came with higher costs for the margin they were earning. Conversely, he said Softchoice has a low cost infrastructure.
“We have to maintain that and we have a power system that gets highly replicated services, which makes us the lowest in Canada, except for CDW. You have to make sure you raise the bar on productivity to drive the bottom line,” he said.
This strategy was also one of the reasons why Softchoice did not acquire the break/fix portion of NexInnovations assets.
“We have been growing our hardware business by 20 per cent and when you combine NexInnovations’ customers and the certifications, plus the people, it puts us at a whole new level. We are now in a great position to leverage the market in a quicker manner,” MacDonald said.
Analyst Michelle Warren of Info-Tech Research called the Softchoice acquisition a wonderful move to help the company better extend its market presence.
“This will enable Softchoice to broaden their reach, including moving deeper into some accounts. NexInnovations’ customers, who were shocked by the announcement, can trust that, if they choose
to work with Softchoice, they’re lucky. The customers are the real winners with this announcement. Although, Softchoice shareholders will definitely benefit from this strategic business acquisition,” she said.
MacDonald agrees that the NexInnovations fall out will increase the channel‘s overall bottom line.
But one of the reasons why he chose to acquire the assets rather than wait for disgruntled customers to approach Softchoice is that his company is able to control the customer contact, the supply chain, the order management system, and the onsite capabilities.
“We are now the incumbent,” MacDonald said.
“By default those employees will come to Softchoice and everyone on the street is trying to take them. We are in a position to make those customers continue with us if we do a great job. We are confident in taking these customers and helping them grow. And, we want to help the employees grow in their careers more importantly.”
Softchoice does not have to honour the NexInnovations deal with Tech Data to be exclusive with them.
However, MacDonald said there are specific customer capabilities where they will still use Tech Data’s supply chain.
