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 CRN/RE: What are the MERLION main benefits from the acquisition of distribution business of Verysell?
Vyacheslav Simonenko: On the basis of our development plans, especially VAD-distribution and new product groups, geographical expansion, we were evaluating market conditions, looking for the suitable companies that would supplement our business exactly in those directions. The companies that had relevant contracts, competence etc. With such an acquisition we would immediately made a jump. The deal with Verysell enabled MERLION to add to its portfolio 20 direct vendor agreements in the area of software and hardware solutions for corporate market and the team of the highly qualified professionals in complex solutions promotion. We are exceptionally interested in computer software business that we almost did not have before. And here we got the ready-made team and contracts with the world leading suppliers such as Acronis, Parallels, Microsoft FG and OEM, Quest Software, Symantec, Veeam Software, VMware. The MERLION product portfolio was extended by the products of the leading server and data storage system suppliers - Fujitsu Technology Solutions, Hitachi Data Systems, NetApp, network and telecommunication equipment suppliers – Alcatel-Lucent, Allied Telesis, Enterasys Networks, Huawei Symantec, Huawei Technologies, Siemens Enterprise Communications, Nokia Siemens Networks, and ZTE. Owning to such range of contracts we definitely became more competitive in these market segments and intend to ensure the active development of VAD component of our business.
Another benefit is the Verysell Distribution branch network, its offices in Russia and Kazakhstan. This also agreed with our plans to expand in the regions and open several branch offices during 2011. Besides there was an idea to explore the markets of our closest neighbors – Belarus, Ukrain, Kazakhstan.
But the integration process was difficult, since the deal is fairly big. To the credit of the teams from both sides maybe not so quickly but we have reached the goal. During the deal preliminary period we were talking to partners and vendors and got their support. I would like to thank the employees of Verysell Distribution as well as the partners and vendors to trust us and stay with us. All in all we are pleased with the results of the acquisition. Generally the deal is for sure remarkable; Verysell Distribution complied with our needs exceptionally.
CRN/RE: Which of their distributor contracts do you think are most important and attractive? And which contracts have you rejected?
V.S.: They all are interesting for us; we have not rejected any of those. Verysell Distribution had different contracts, large and prospective and the ones that probably will never develop into a big business but are interesting in a single-purpose area since they have earning capabilities and give the unique specialization – the contract evaluation criteria differ. It is a magnificent agreements pack; the team of Verysell Distribution did a good job. Let’s say before the deal we could not get those contracts.
CRN/RE: And what have been added at the partner network level?
V.S.: Our partner networks intersected very much. Working in cooperation with more than 4 thousand Russian companies we had already had the commercial contracts with the majority of Verysell Distribution partners, and filling such a contract with business is so to say just a business issue. It is true that changes are possible in credit line or respite since the equipment is very different. Of course we have added to our client portfolio a small group of partners that are absolutely new to us but we have already started our active cooperation and everything is going smoothly. The main synergy with the deal has happened not in the partner network level of course but on the level of vendors contracts. Verysell Distribution had 20 contracts and we have 200, so both our existing partners and the new ones have gained the access to the wider variety of products.
CRN/RE: In your company statements it was said that the main purpose of Verysell Distribution was “the expansion of VAD-component in turnover”. How exactly has it changed or will change? And by the way what do you mean exactly by VAD-component since there are different interpretations of it?
V.S.: As to our understanding of VAD it is conventional: it is the distribution with the added service – pre-sale, consulting, both technical and finance service, promo programs in a channel, and with the general possibility to influence the channel in terms of technologies promotion and vendors decisions. MERLION has already had the VAD-distribution experience. The MERLION project System Solutions (MSS) in 2005 was set into a separate business but in 2009 the MSS Company was merged back to the main distributor business. For the last three years this line has broken through to our top 10 product lines having risen in several positions. According to the results of 2010 this line had 12% share in total income of MERLION. By the end of 2012 we intend to double the VAD revenue. There are no long-term forecasts; we have to get through the current year.
CRN/RE: What changes have happened in the MERLION organization due to the merger with Verysell Distribution?
V.S.: There were no global changes; the staff of Verysell Distribution was integrated to our existing organizational structure. But one major change connected with the software products appearance in our portfolio has happened though. We were selling, say, the data storage systems before, but the software ratio in our business was more than low; we almost didn’t have this component. That is why with the acquisition of Verysell Distribution we have created a relevant department which focuses on the business development in the software area. Its main functions are the development of the sales channel, promotion of the hardware and software-based solutions, consulting and client support, complex solutions realization (software + servers, data storage systems etc.) and others. In the frames of the department there are separate product groups dealing with business development of Microsoft, Symantec, VMware, Veeam, Quest, antivirus software and applications. There are around 30 people in the department now, and it has been developing. The sales increase of software is possible not only twofold as in the Verysell Distribution business overall, but in several times.
Technically the integration process of Verysell Distribution has completed but the business development is naturally continuing. Particularly the MERLION Center of Technical Examination will be created in the company’s structure in the nearest future. This is because with Verysell Distribution acquisition the number of complex products that require pre-sale has increased, and it became possible to sell complex solutions for our partners. Therefore we will put all the engineers together in one subdivision – this very Center.
CRN/RE: What did you do with the regional offices of Verysell Distribution? What are your plans of the regional development?
V.S.: We got offices in Bryansk, Ekaterinburg, Novosibirsk, Rostov-on-Don, Samara as well as Almaty under our control. The Bryansk office was inefficient, so we decided to close it down. The rest we will develop to the level of the full-scaled representative offices of MERLION (an office and a warehouse) with the functions of development the sales to the existing partners, searching for the new ones, and sales development of the new product groups, regional logistics and others. The number of staff in the branch offices is different – from 5 to 16 people. In general there will be no more changes in the structure of our regional sales since we are represented everywhere equally. The ratio for Moscow will be increased as due to the Verysell Distribution contracts the sales to the large integrators concentrated in the capital will increase.
As I have already said MERLION had the definite plans of its regional development – we were planning to open the branches in Novosibirsk and Ekaterinburg, and in Rostov-on-Don and Samara we have been developing in the frames of the retail project CITYLINK, and they are large enough objects – 12 thousand sq. m. each, so we can use them as well. In the end due to the deal with Verysell Distribution some more offices have appeared. We are now adjusting the work of the regional branches. As to the other CIS countries what we had was just an idea and here we got the operational office in Almaty. We decided to slow down with the further development of the branch offices network for the time being. The definite plans of the regional development will be worked out in the end of the current financial year, which is in the first quarter of 2012.
CRN/RE: How many employees have stayed with MERLION?
V.S.: In the final count 70 employees of Verysell Distribution have moved over to our company. Unfortunately it is not 100% since the deal had stretched in time and of course there was an uncertainty period plus the natural staff turnover…
CRN/RE: What are the main difficulties you had to face in the process of the deal and integration of the Verysell distributor business to the MERLION structure?
V.S.: There were enough difficulties in all the stages since we had acquired the big and serious business. The main difficulties were of course connected with the human factor. Initially we were considering several variants: for example, to leave the company as it was or take only certain departments… In the end the decision was reached about the full integration of Verysell Distribution into the MERLION organizational structure. Naturally the employees were used to their own company, to the existed working conditions; and the transit to the new company had appeared to be a stress for them: a new office, other corporate rules, another bookkeeping system and the whole lot of other differences. And exactly the people integration proved to be much more difficult than I imagined. But let me mention a positive moment. When you have been working for the same company for many years, you get used to it and it seems everything is as it should be. And then all of a sudden people from outside come and look at this all with a fresh eye and occasionally make valuable remarks and proposals. And we take into consideration the most useful business related ideas. There is an Idea Bank in MERLION; it is something like a Innovators Club, in its frames we pay real money for the employee’s valuable proposals. That is the people who came to us from Verysell Distribution had not only change themselves but they took part in our company innovations to some extent. The main thing is that we got the team of highly qualified and valuable professionals. And it stands high.
CRN/RE: How will the Verysell distributor business acquisition influence the MERLION business capacity?
V.S.: According the results of the financial year 2010 (it finished on March 31, 2011) the total revenue of MERLION was almost 77.99 billion rubles. We have quite an aggressive plan for the current financial year – the increase of about 40% is provisioned. The rate of expansion of the business inherited from Verysell Distribution will as I have already said be higher than the average of MERLION; and that will contribute to the overall growth of the company.
CRN/RE: Are there any other acquisitions to be expected from MERLION?
V.S.: We got a good experience in the area of mergers. This deal has taught us a lot of things. Therefore we will make through possible future acquisitions easily at all stages. We are ready to consider possibilities of acquiring other companies and not only of Enterprise nature, but for example the companies specializing in software (we haven’t finished the developing of our contract portfolio yet), as well as home appliances companies. As to the last specialization, MERLION has been developing it successfully but with its own efforts so far. And it would be good to acquire some nice company. Therefore, as they say “Hello, we are looking for talents!” |
