| Softchoice buys up NexInnovations assets
9 October, 2007
By Mark Cox
Completing a fairly rapid fall from its status as
one of Canada's best known and most respected resellers,
Toronto-based NexInnovations Inc. has been sold to
Toronto-based Softchoice Corp. Softchoice has announced
it has entered into a purchase and sale agreement
to acquire the technology solutions division of NexInnovations
for $10 million.
The deal includes customer relationships and records,
but Softchoice is acquiring more than just that key
customer base. Softchoice President and CEO David
MacDonald told eChannelLine that they were acquiring
everything except the break-fix business, and its
related financing and purchasing components. A certain
amount of chaos had existed among NexInnovations staff
since the company told its people not to come in to
work a week ago, but MacDonald indicated that with
the announcement of the acquisition, people were being
brought in and put back to work
The deal follows the announcement last week that
NexInnovations had filed for bankruptcy protection
from its creditors -- the second time in little more
than a year it had done so. Rumors that the company
was in trouble again had been swirling for some time,
and following the filing, those rumors switched to
the topic of whether the company would simply close
its doors, or whether it would find a buyer, and what
that buyer's purpose might be. MacDonald indicated
that Softchoice had not been actively looking at acquiring
NexInnovations before it filed for protection last
week, but saw in that an opportunity to advance its
own business model of broadening out from its original
base as a large corporate software reseller.
"Hardware is now 20 per cent of our revenue.
We were looking for a way to push that to the next
level. When NexInnovations went into CCAA (the Companies'
Creditors Arrangement Act), that presented an opportunity
and also helped to solve the situation for their customers
& We see this as part of a natural extension of
our model in the enterprise solutions space."
There is a certain irony in Softchoice picking up
the NexInnovations assets, as Softchoice's own rise
-- with a very different business model -- paralleled
the decline of NexInnovatons. Softchoice began and
prospered as a corporate software reseller, concentrating
on fulfillment and picking up nice margins back in
the days when software margins were generally quite
attractive. In 2002, it made its initial foray into
the hardware business, becoming an HP partner, and
has continued to expand its business with HP and with
other hardware vendors, while also expanding its asset
management service offerings. Its virtual services,
while still small as an overall component of revenue,
have been rapidly growing at a rate of 300 per cent
a year. And the company has continued to post excellent
bottom line results, while some traditional VARs like
NexInnovations have struggled.
MacDonald is confident that Softchoice can integrate
the NexxInnovations assets and use them to enhance
its existing business while maintaining its strong
record of performance.
"We have a superior model, in which our outbound
reps develop strong relationships with customers,
and it has been quite profitable. We also have a well-developed
management model. The combination of systems and people
make us cost-effective."
MacDonald added that not taking the break-fix business,
which he described as being very resource intensive,
with high fixed costs, would remove a significant
drain on performance. He also said that the new assets
would benefit from Softchoice's scale and infrastructure.
Before its collapse, NexInnovations had been working
exclusively through Tech Data. MacDonald indicated
that much of this business would continue to flow
through Tech Data, but that they would also be able
to shop around to ensure the best deal for customers.
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