18 Sep Berbee believes acquisition by CDW will make it a national IT player
Madison, Wis. – CDW Corp., a $6 billion-a-year information technology product and services provider based in Vernon Hills, Ill., has agreed to acquire the stock of Madison-based Berbee Information Networks Corp. for $175 million in cash.
The acquisition, which has been approved by the boards of both companies, is expected to close by the end of October, subject to regulatory approvals and approval by Berbee shareholders.
Berbee, which has evolved into more of a business problem solver than a technology seller, will operate as a separate business unit of CDW and maintain its current product and service offerings, staffing, and locations.
The company employs 800 people and has 11 offices and two data centers in six Midwestern states.
As part of the transaction, Berbee’s top three executive officers, including CEO Paul S. Shain, will remain with Berbee and continue to manage the business. Shain will report to CDW Chairman and CEO John Edwardson and become a member of the CDW executive committee.
Shain characterized the acquisition as a “key opportunity to partner with a company that shares its interest in building Berbee in to a larger and more significant operation on the national stage.”
Berbee will have cross-selling opportunities with CDW and access to CDW distribution facilities in Vernon Hills and North Las Vegas, Nev.
In the past, Berbee has done limited product distribution, and most of what it has delivered has been provided in the field by a staff of 300 engineers or drop-shipped.
One of the fortunate 500
CDW, which ranks 343rd on the Fortune 500, is a provider of technology solutions for business, government and education. The company employs about 4,500 people and generated $6.3 billion in sales in 2005.
CDW intends to double Berbee’s revenues on an organic basis in the next five years, according to Edwardson. Berbee, founded in 1993, reported $390 million in revenue and $22 million in profit during the 2006 fiscal year.
In the past, Berbee has grown through a combination of organic growth and acquisitions, but Shain said the projected organic growth rate is achievable. “That would be consistent with our planned growth rate,” he stated. “Our five-year plan would have done it through organic growth alone.”
Edwardson cited “multiple synergies” between the two companies, and said the transaction supports CDW’s strategic goals of capturing a greater share of its customers’ IT spending and becoming the world’s largest technology provider.
Prior to the transaction, Berbee executives visited CDW’s Vernon Hills distribution center several times, “and they were very excited about using our capabilities to help roll out big transactions with their customers,” Edwardson said. “So there are some great synergies here, we believe, in operations between the two companies.”
CDW provides technology products and services to customers in business, government, and education. It sells and services a number of leading technology brands, including Apple, Cisco, IBM, Lenovo, Microsoft, and Samsung.
Meanwhile, Berbee provides off-site data hosting for clients and serves as a technology reseller for the likes of Cisco, IBM, and Microsoft. The company serves clients in the corporate, healthcare, and education spaces, plus state and local governments.
While there are synergies, approximately two-thirds of Berbee’s customers are currently not CDW customers. “There is very little overlap between what they sell and what CDW sells,” Edwardson said.
Edwardson said CWD looked at a number of companies, but Berbee “was by far the best.” He noted Berbee’s successful integration of three acquired companies, and said Berbee offers growth potential beyond organic means through future acquisitions.
A joint transition team will look at branding and other points of integration between the companies and their customers.
CDW expects the acquisition to increase 2007 earnings by approximately $0.05 per diluted share. At the close of trading on the day the acquisition was announced, shares of CDW were selling for $62.86, down 14 cents from its previous closing price of $63 per share on the NASDAQ Stock Market.
Having links to another Fortune 500 company located outside its borders should be a plus for Wisconsin, including the potential for spin offs where CDW establishes other local operations, said Tom Still, president of the Wisconsin Technology Council.
“What we have here is a major Fortune 500 company that has identified a home-grown Wisconsin company as being consistent with its business model,” Still said. “I think the match is going to work out well.”
Jim Rice, president and CEO of the Information Technology Association of Wisconsin, called the acquisition of Berbee a textbook example of company going from start up to realizing shareholder value. Berbee began in the basement of founder James Berbee with an initial investment of $15,000, and has evolved into lucrative markets like off-site data hosting.
“It shows that Wisconsin has very good prospects for entrepreneurs to start something and take it through to shareholder realization,” Rice said.
• Berbee wins two Microsoft awards
• Berbee puts people first to deliver high-quality technology
• At Berbee, president replaces founder as CEO
• Berbee buys Appleton IT firm
• Berbee adds features to VoIP broadcast system
• Berbee acquires Ohio IT company, expands eastward