Merger of Metafore and Microserv targets national customers

Published: December 16th, 2009

Executives for Hartco-owned solution providers Metafore LP and Microserv, which announced plans to merge earlier this week effective in January, say the new Metafore will be better able to service national customers across the country, and compete with the likes of Softchoice and Compugen.

However, the new Metafore’s three-person leadership team, which will be composed of current Metafore president Bryant Jackson,current Microserv vice-president and general manager Michel Lacasse and Metafore’s David Kelly, will share the president’s office along with each talking responsibility for a region, is raising some eyebrows.

Jackson told CDN this structure will allow Metafore to have senior executives in the regions with the customers, which has always been Metafore’s business philosophy and leads to better customer service. Jackson, for example, has long been based in Calgary and will have responsibility for Western Canada.

“Accountability will be shared at the regional level because we do business with companies that operate their businesses at the regional level,” said Jackson. “The buck stops at the region. We can be there quicker and address the situation faster.”

Microserv’s Lacasse added while the three executives will together make decisions on the strategic direction of the new Metafore, day-to-day each will manage their respective regions. The executives will also report into parent-company Hartco.

James Alexander was a founder of Metafore and a partner in the company when it was acquired by Hartco in 2002. Now an analyst and senior vice-president with London, Ont.-based Info-Tech Research Group, Alexander said the three-person office of the president that will lead the new Metafore caught his eye.

“What I find quite ironic about that is when we first formed Metafore we had the same issue: a bunch of owners coming together owning pieces of business,” said Alexander. “One piece of advice (Hartco CEO) Harry Hart gave us was don’t try to run a business with more than one boss. Who’s the ultimate boss? Probably (Hartco president) Pat Waid.”

Alexander speculates though that, with Bryant possibly getting to the point where he’s considering retirement and would want to have a transition strategy in place, the current structure may not be permanent going forward.

While both solution providers have worked together over the years, by merging, Jackson said together they’ll be able to better service national customers. Being one entity will also give the company the national reach and heft to compete with the larger solution providers in the Canadian market, such as Softchoice and Compugen, which have been gaining market share recently. The two companies have some shared customers, and he said merging will make it easier to service those customers as well as attract new ones.

“A merged company will give our national clients one name, one brand to work with. We’ll be able in 2010 to deliver a national service package,” said Jackson. “We’ll deliver national service to national clients, focused on face-to-face and Teleweb sales.”

Jackson sees little overlap between the two companies, and anticipates minimal redundancies and no planned layoffs resulting from the merger. There is some minimal overlap on service in Quebec and most backend functions, such as human resources and accounting, are already shared between the two companies.

Microserv’s Lacasse said the timing for the merger was right because both companies have evolved significantly over the last couple of years, including the creation of a new enterprise solutions group.

“A lot of what we’ve been carrying to market is something we can bring to our shared customer base across Canada,” said Lacasse. “By putting our teams together it will be easier to maintain the levels of service we need to have, we will be able to add to the portfolio going forward. We see a lot of synergies. I think this will help us accelerate our go-to-market.”

Overall, from a customer perspective Infotech’s Alexander said the merger is a good thing. Metafore has strong regional coverage across Canada, while Microserv has been focused more on Quebec. Together, they’ll be able to leverage each other’s strengths, both in marketing and technical resources.

From Hartco’s perspective, Alexander said it’s a step in the continued evolution of the company from a franchisor and distributor over the last decade into a large value-added reseller/systems integrator. While once Hartco had as many as 130 franchise locations across Canada, today, with the departure of Compuserve and the Telephone Booth chains, the main revenue driver for Hartco is now the Metafore/Microserv business.

“If you look at their financials you can see $468 million in revenue last year, and roughly $400 million of that was from the combination of Metafore and Microserve,” said Alexander. “They’re not really much of a distributor or franchisor anymore.”

While year-end financials likely helped dictate the timing of the merger, Alexander said Hartco also wouldn’t have wanted to bring the two companies together until both were ready for it.

“Harry Hart has a great affinity for entrepreneurs, and both companies were started by entrepreneurs before they became Hartco,” said Hartco. “I’m sure he was reluctant to put two entrepreneurs together until they were both ready to do it.”

Paul Edwards, director of SMB and channels research with IDC Canada, said as both companies are part of Hartco it’s unlikely the merger is indicative of a wider trend of channel consolidation.

“But it seems like a good move to have national coverage consolidated under one VAR rather than having two separate regionally focused players,” said Edwards. “There’s probably some streamlining of processes that will be a key benefit too.”