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Author: Dominique Raviart
There's been a flurry of smaller acquisitions in the French IT services sector recently. In the past four weeks, we have witnessed the acquisition by Apx Synstar of 67% of Getronics' French arm; the sale by Ares, a hardware products and services reseller of its desktop arm; and the acquisition by Team Partners of a privately-held player, Datem. Meanwhile, France Telecom has acquired Groupe Diwan, a network services player.
The economic environment has improved recently, and it is showing in the increased level of M&A activity in IT services. Apx Syntar is actively consolidating the hardware services market and operates in a frankly unfavourable market segment for large players with big overheads and no critical mass. Getronics France brings expertise in application and infrastructure services, revenues of €63m, and a 2006 forecast losses of €8m. Synstar before the deal expected pro-forma revenues of €140m of which 35% in services.
Ares also operates in the hardware products and services area and unsurprisingly it is getting out of low-margin activities by selling a business worth some €76m in revenues to the lesser-know inmac wstore. Ares, like other players, is aiming to increase its share of revenues coming from services and is going through a heavy period of restructuring. Ares may succeed, but let's not forget that Osiatis, a player active in infrastructure maintenance and services operates at an operating margin of around 5%. Ares like others may find that services are not the panacea!
Meanwhile, the combination of Team Partners with Datem raises questions. Team Partners is a well-known staff augmentation player that barely survived the last downturn by merging with the privately-held GBI. The operations around Team Partners suggest that rather than building a consistent IT services player, the investors behind Team Partners and Datem are aiming to enhance the profile of the company and sell it with a profit . . . before the next down-turn.
Finally, the France Telecom/Orange Business Services acquisition is small: Diwan had 2005 sales of around €36m and had an operating margin of €1m. Not in the same league as the failed acquisition of Telindus, which was bought by Belgacom. We think the move is representative of FT investing in network and IT services. We will be commenting further on this.
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