Sirius Inks Blockbuster Deal To Acquire Forsythe, Creating $3.26B Solution Provider Behemoth

Sirius Computer Solutions has struck a "definitive agreement" to acquire Forsythe Technology creating a $3.26 billion behemoth that ranks as the 20th largest solution provider in North America.

"I am very pleased to announce that Forsythe has signed a definitive agreement to be acquired by Sirius Computer Solutions," Forsythe CEO Bill Brennan wrote in an email to all employees Thursday. "This puts us in a great position to scale our business and extend our geographic reach."

The deal combines Sirius, one of IBM's top partners, No. 26 on the CRN SP500, with Forsythe, No. 37 on the CRN SP500, one of biggest security integrators in North America.

The deal catapults the combined company to No. 20 on the CRN SP500 ahead of Unisys, Presidio and Connection.

[RELATED: Sources: Data Center Goliath Sirius In Negotiations To Acquire $1B Security Powerhouse Forsythe]

Sirius is owned by private equity firms, with workhorse Kelso & Co. scooping up the San Antonio, Tex.-based company for $830 million in September 2015.

Skokie, Ill.-based Forsythe, has the unusual distinction of being 100 percent employee-owned.

The acquisition is subject to regulatory approval and expected to close Oct. 31, Brennan told Forsythe employees.

Sirius and Kelso declined to comment for this story, while Forsythe and IBM didn't immediately respond to requests for comment. CRN reported in June that Forsythe was up for sale, and then in August that Sirius was in negotiations to purchase Forsythe.

Forsythe is one of the largest security integrators in North America, one source close to the company said. All told, the two security practices combined account for $510 million.

"The security practices are big in both companies, and that's going to be an interesting integration," the source said, noting that overall there is "significant overlap" between the two companies.

Sirius is IBM's largest value-added reseller in the United States primarily serving large enterprises and medium-sized businesses, with more than 52 percent of Sirius's revenue comes from Big Blue's products and services, Moody's Investors Services reported in September 2015.

The source said acquiring a firm like Forsythe with a strong Oracle presence will enable Sirius to diversify its infrastructure-focused revenue and leave the firm less exposed to Big Blue's performance challenges.

"Oracle is really the only logical partner for someone like Sirius to go for," the source said. "I suspect that they're looking to build up an Oracle footprint that rivals their IBM footprint so that they're not as dependent on IBM's success for their success."

Oracle provided startup funds and continued financial support for Forsythe's Oracle-exclusive Meta7 division, which has become a Platinum level partner providing architectural and implementation services around Oracle infrastructure, software, and cloud technologies. In just two years, Oracle has become Forsythe's third-largest vendor in terms of annual sales, the source said.

One area of potential conflict is the fairly substantial cash bonuses Oracle has in place for channel partners that replace their customers' IBM servers and workstations with compute and storage products from Oracle, the source said.

IBM doesn't have a corresponding policy in place rewarding partners for replacing Oracle hardware with products from Big Blue, according to the source.

"They're going to have to weigh the damage to the IBM relationship against the cash available in the Oracle relationship," the source said.

Sirius is a premier IBM and VMware partner, a platinum partner with Hewlett Packard Enterprise and Intel, a gold partner with Cisco, Microsoft and Trend Micro, and a standard Amazon Web Services partner, according to the 2017 CRN Tech Elite 250.

Forsythe, meanwhile, is a premier Dell, IBM, and VMware partner, a platinum HPE, Oracle and Symantec partner, a gold Cisco and Citrix partner, and a star NetApp partner, according to the 2017 CRN Tech Elite 250. The company has $1.1 billion in sales and roughly 1,000 employees, including 500 engineers and consultants with 2,500 certifications.

Forsythe workers will become 100 percent vested in the company's Employee Stock Ownership Plan (ESOP) as of Oct. 31, Brennan told employees, and will be given more information the week after the deal closes regarding what they can do with the money.

The source said Forsythe workers experiencing financial difficulties might want to collect their ESOP right away, but that most company employees will likely roll their proceeds into a 401(k) to avoid a major tax liability.

Meanwhile, benefits for existing Forsythe employees will remain the same until the end of 2017, Brennan said, with more information about 2018 options to be provided after closing.

Forsythe employee concerns with the Sirius deal will likely center around practical day-to-day issues such as potential changes to the sales comp or health insurance programs, the source said. But in the end, the source doesn't expect to see much attrition on the Forsythe side of the equation.

"I don't sense any real angst anywhere," the source said. "I think most people are going to be perfectly happy and stay right where they are."