JSE- and LSE-listed Datatec has acquired a 50.01% stake in Indian ICT distribution business Inflow Technologies, marking its entry into the lucrative sub-continent and increasing its footprint in emerging markets.
Inflow Technologies has a presence in nine key Indian cities, as well as operations in Sri Lanka and Singapore.
According to Datatec, Inflow is a value-added distributor focusing on technology enablement and distribution of security, storage and networking products, solutions and services.
The Indian company has alliances with 22 global technology vendors, including CheckPoint, Nokia, McAfee, Ironport, Websense, Radware, NetApp and Quantum. The investment will also provide Datatec with a platform to add additional vendors and eventual incorporation into the Westcon brand.
Datatec group financial director Ivan Dittrich said this morning the acquisition is part of the group's key expansion into emerging markets, and follows a Turkish acquisition made in the middle of last year, as well as a "sizable" Brazil buy in May.
"Our emerging market businesses are performing well. Those economies are reasonably resilient [to unfavourable global economic conditions], compared to the US and Europe."
India, he says, is a lucrative market and the Inflow acquisition is small, but strategic. "It gives us a local partner and the opportunity to add some of our skills and partners."
Revenue target
In the medium-term, says Dittrich, it is expected that the Inflow business will be grown organically, and plans are to double the company's revenue within the first year. Inflow reported revenue of $32 million in the last financial year, ended 31 March 2008, and employs 130 people.
In the long-term, he adds, it is likely Datatec may conclude further acquisitions in the region.
"For us, entering emerging markets is a means of spreading our exposure and diversifying risk. We already have a very strong presence in the US and Europe."
The group would not divulge the value of the deal, but Dittrich says it was paid in cash and included a share subscription. The remaining 49.99% of Inflow will continue be held by management and other existing shareholders.
Datatec CEO Jens Montanana commented in a statement: "India is a very large and fast-growing market offering strong prospects in our sector with a lower cost of entry compared to many other developing markets and potentially higher returns and greater organic investment opportunities.
"Our investment in Inflow is another important step in our international strategy to increase our exposure to the world's major emerging markets, which has recently seen our presence grow in markets such as Africa, the Middle East, Turkey and Brazil."
Byju Pillai, CEO of Inflow Technologies, says: "This investment, along with access to Datatec's global best practices in value-added distribution, gives us greater ability to grow our market share, make alliances with new technology vendors and expand into new geographies."
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