Softchoice Buys Its Way to Growth

Softchoice Corp. bought value-added reseller Optimus Solutions this week to cap an acquisition spree that saw Softchoice pay nearly $100 million to gobble up three companies in less than three months.

Toronto-based Softchoice closed deals for Optimus Solutions on Wednesday, Software Plus in December and NexInnovations Inc. in October. In all, Softchoice, a public company and major Microsoft Large Account Reseller that reported $511 million in revenues for the first nine months of its current fiscal year, added companies with annualized revenues of about $532 million. The acquisitions plus other hiring have bulked up the company's staff from about 500 employees to more than 800 employees.

At a conference call this week on the Optimus Solutions deal, Softchoice president and CEO David MacDonald said the acquisition streak was over for now. The company would focus on integrating its new holdings.

"Our focus is on leveraging these assets to achieve our goal of becoming one of the top five solutions providers in North America," McDonald said in a statement.

Softchoice defines its core mission as assisting customers in selecting, acquiring and managing technology. It counts itself as the fifth largest of Microsoft's Large Account Resellers in the United States and claims to manage the largest number of Microsoft Enterprise Agreements of any U.S. LAR. The company has also been named by Microsoft Canada as the "Large Account Reseller of the Year" for six years in a row.

Softchoice's Acquisitive Streak
Company Date Acquired Sale Amount Trailing 12-Month Revenues
Optimus Solutions Jan. 3 $38.1 million* $140 million
Software Plus Dec. 11 $45 million $192 million
NexInnovations Inc. Oct. 12 $10 million $200 million
*Softchoice could pay an additional $9 million based on Optimus Solutions 2008 performance.

Softchoice's acquisitions support a strategic plan to grow market share in hardware and software sales in Canada and the United States and across the mid-market, enterprise and public sector segments. Until now, Softchoice has been primarily a mid-market and public sector player in the United States.

Optimus Solutions, a VAR for Cisco and IBM, brings Softchoice a 100-person company with capabilities to deliver hardware solutions across the United States. Of the Norcross, Ga.-based VAR's $140 million in revenues over the last 12 months, 87 percent came from hardware, 40 percent came from the enterprise segment and 10 percent came from the public sector. Softchoice paid $38.1 million for the company, with deferred payments of $9 million that depend on 2008 performance.

By buying Software Plus in December for $45 million, Softchoice picked up the ninth largest Microsoft LAR in the United States and gained access to Software Plus' customer base of enterprise and academic organizations. According to company statements, there is very little customer overlap between the two Microsoft LARs. Software Plus did about $192 million in revenues in the year before the deal.

The $10 million agreement to buy Toronto-based NexInnovations Inc. was conducted in October to bring more Canadian enterprise customers into the Softchoice fold. Softchoice wound up keeping about 83 NexInnovations employees from the $200-million-a-year firm, after quickly selling off NexInnovations' break-fix services business with about 400 employees to Brains II, a Canadian IT services provider.

About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.