• PC Connection (Nasdaq: PCCC) announced yesterday that it was acquiring fellow IT solution provider Softmart. Financial details of the transaction was not disclosed, but in the year ended Dec. 31, 2015 Softmart generated approximately $200 million in revenue.
• Founded in 1982, Softmart is a global reseller of software, hardware and it services products. It differentiates itself through its expertise in Volume Licensing Programs, and has long been affiliated with Microsoft as a Large Account Reseller and today as one of the original Microsoft Licensing Solutions Partners.
• PC Connection, No. 20 on CRN’s Solution Provider 500 listing, reported strong revenue earlier this year and as a result saw its shares jump up after declining earlier in the year with the rest of the market. However, the company missed in its second quarter results and as a result has seen its share price decline approximately 8 percent since then.

In the Cloud Both Threats and Opportunities

• Products Plus: The increasing importance of the cloud in the enterprise has fundamentally transformed the role of today’s solution providers. Companies that are able to build their services capabilities enjoy stronger margins and higher valuations – and the result is a pivot to the cloud on every level.
• Moving the Goalposts: Microsoft’s reformation of its LAR program impacted several of its largest partners, forcing them to adapt as the software provider accelerated its own transformation to the cloud. As a result, partners like Softmart have worked to transition their business model to incorporate Azure, Office 365 and other cloud services.
• Growth Is Key: Size is key for solution providers, as it allows economies of scale that are critical to success in what is historically a low-margin industry. With organic growth low, M&A can provide a useful shortcut to expanding into new geographies or adding new customers – even for companies that have not been historically active in M&A.

For more information about this transaction, click here to read the press release.