Faritec has concluded a deal with storage specialist Shoden Data Systems, in which Shoden will take a controlling interest in Faritec in return for a loan of R29 million, which will convert to equity subject to shareholder approvals.
Faritec was forced to look for outside funding when the ongoing economic crisis caught up with the company's recent acquisition spree, according to market analyst firm Frost & Sullivan.
“Faritec has been on a buying binge for the past two to three years, but there was some overlap with these acquisitions, as some of the companies had the same services and expertise as others,” explains Frost & Sullivan ICT industry analyst Lindsey Mc Donald.
Eventually, says Mc Donald, questions began to be asked about whether Faritec should have focused on a more specialised acquisition strategy and whether they were spending too much money. Faritec argued that its client base was expanding quickly and it needed to acquire additional capacity to maintain service levels.
But when the financial crisis struck, Faritec found itself in a dilemma. A lot of its deals were financed, notes Mc Donald, and as SA started to feel the effects of high interest rates, fuel price hikes and the “weight of the global environment”, Faritec's position became increasingly exposed and the company found itself in serious need of cash.
The Shoden deal is “very interesting,” says Mc Donald, because Shoden provides data centre solutions focused on the storage side. Storage, she points out, is a growing market in Africa, mainly due to issues of compliance, adding that the demand for storage solutions is especially strong in the financial services industry where records now have to be kept for seven years.
Shoden is closely aligned with Hitachi. Mc Donald says this move by Shoden could be seen as an attempt to gain a greater foothold in the country against competitors such as EMC.
“Faritec happens to be a good target right now,” she says. “It needs the cash, and Shoden benefits from its established presence.”
“In the next two or three years we are likely to see the uptake of storage into other verticals as well,” Mc Donald concludes. “The retail sector in particular will require these services.”
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