UK-Based Computacenter To Acquire Pivot For Big US Expansion

‘The acquisition of Pivot represents an opportunity to increase our scale, geographic footprint and capabilities in US. ... The businesses are a good fit and the combination gives us the opportunity to enable the long-term success of customers, partners and people from both teams,’ says Computacenter CEO Mike Norris.

Computacenter, the London-based IT solution provider giant, is looking to expand its U.S. business in a big way with its planned acquisition of Pivot Technology Solutions.

Computacenter said Wednesday that it plans to acquire Toronto-based Pivot Technology Solutions in an all-cash offer of CA$2.60 per share, or a total of CA$105.8 million (about U.S.$80.4 million), using Wednesday‘s exchange rate.

The deal is Computacenter‘s first significant push for an increased share of the U.S. IT market since its late 2018 blockbuster acquisition of San Francisco-based FusionStorm, which increased Computacenter’s U.S. headcount by 50 percent and gave it a full range of services to offer its U.S. customer base.

[Related: Four Things You Need To Know About Computacenter’s FusionStorm Buy]

Computacenter is listed at No. 44 on CRN‘s 2020 Solution Provider 500 list.

Pivot is a publicly-traded IT solution provider listed on the Toronto Stock Exchange.

However, Pivot has about 600 employees in the U.S. and 100 in Canada, and gets about 85 percent of its revenue from U.S.-based clients with a focus on the enterprise.

Pivot for its fiscal year ended Dec. 31 reported revenue of $1.2 billion and profit before taxes of $20.7 million.

For its second fiscal quarter 2020, which ended June 30, Pivot reported revenue of CA$332.1 million, or U.S.$252.4 million, which was down 28 percent over that of its second fiscal quarter 2019. The company also reported a net loss of CA$555,000, or U.S.$422,000, which was down significantly from last year‘s net income of CA$1.3 million, or U.S.$1.0 million.

Computacenter plans integrate its current U.S. operations with Pivot, a move the company said will about double its revenue and headcount in the U.S. Computacenter is also looking for a boost in its U.S. services business thanks to Pivot‘s $80 million annual revenue service business.

Prior to the acquisition, Computacenter for its second fiscal quarter of 2020, which ended June 30, experienced flat revenue year-over-year growth thanks to a big reduction in its higher-margin mid-market customer base.

However, a push by the company to cut its administration costs in the first half of the year that was accelerated by the COVID-19 coronavirus pandemic helped the company increase its adjusted operating profit for the first six months of the year by CA$4.3 million compared to a poor comparative period in 2019.

Scottsdale, Ariz.-based martinwolf M&A Advisors, one of the IT industry‘s top channel investment advisors, wrote in a Wednesday analysis that the acquisition price of Pivot represents a 40.5 percent premium to Pivot’s closing share price on Tuesday, as well as a 36 percent premium to Pivot’s 20-day volume weighted average share price.

“Computacenter today is one of the largest solution providers in the world and one of the fasted growers in the last three years, due to a combination of strong organic growth and smart acquisitions such as this one and that of San Francisco-based FusionStorm,” wrote Martin Wolf, founder and president of president of martinwolf M&A Advisors, in the report.

Wolf also wrote that Computacenter CEO Mike Norris, who has been chief executive for more than 20 years, is “widely considered a leader in integrating companies and eliminating redundancies.”

After the acquisition closes, both Pivot President and CEO Kevin Shank and Pivot Chief Financial Officer David Toews are expected to play key roles in the combined Computacenter business.

Computacenter did not respond to a CRN request for more information by press time. However, Norris, in a prepared statement, said that the company is pleased with its progress in the U.S., including its 2018 acquisition of FusionStorm.

“The acquisition of Pivot represents an opportunity to increase our scale, geographic footprint and capabilities in US. Additionally, Canada expands our total market opportunity and helps us meet the needs of international customers. The businesses are a good fit and the combination gives us the opportunity to enable the long-term success of customers, partners and people from both teams,” Norris said in the statement.

Shank, in his prepared statement, said, “Computacenter’s strong US and global organization, along with its robust and industry leading services portfolio, make it a great fit for Pivot’s US and Canadian businesses.”