PinkRoccade goes to...

The takeover battle for the Dutch IT services provider PinkRoccade has come to an end. Ordina has withdrawn its offer, leaving Getronics as the only suitor. What does Getronics ñ which is also headquartered in the Netherlands ñ expect from the takeover, which by now almost seems to be a done deal? What effects will it have on the Dutch market for Software and IT Services? Christian Glas, consultant with PAC and an expert on the Dutch IT industry, comments these questions.

Munich, 9 February 2005:
Over the past few years, Getronics has completely reversed its strategy, which for some years had been focused on international expansion. In 1999, the provider acquired Wang, a large multinational company focusing on the desktop area. Intended to help Getronics become a global player, the integration of Wang turned out to be a costly and very complex venture, not least because Wang was still struggling with the consequences of taking over Olivetti. In addition, the deal was badly timed ñ shortly afterwards, the IT bubble burst, plunging the market into a turmoil. Like most IT providers, Getronics faced falling sales figures and decreasing profitability in the following years. The desktop services market was particularly hard hit by the difficult environment as it is characterised by low added value. This became a real threat to Getronicsí survival.

Meanwhile, after suffering a 20% loss of total revenues in 2001, the IT services provider has returned to the black by divesting parts of its operations. In 2003, the operating loss fell to Ä62 million, which was 2.3% of total revenues. It is true that Getronics posted a year-on-year decrease in sales of 9.4% in the first six months of 2004; however, it managed to turn an EBITA* loss of Ä1 million incurred in the first half of 2003 into a Ä24 million profit. This upward trend went hand in hand with strategic realignment. ìThe company today focuses on specific local markets ñ such as the British and the Dutch ones. All other markets are to be covered through partnerships,î explains PAC consultant Christian Glas. In his view, Getronics wants to considerably improve its position in the Dutch market by taking over PinkRoccade, thus realising its new strategy.
But what consequences will the takeover of ëPinkí ñ that is how the Dutch often call the company ñ have for Getronics? It would make Getronics the largest IT services provider in the Netherlands. In PACís current ranking, PinkRoccade comes 2nd while Getronics comes 5th. ìGetronics will be able to markedly extend its position in the public sector. After the takeover, the new company will not only have the critical size for this industry, but it will even be the uncontested market leader. In addition, it will improve its offering. This is due to the fact that Pink provides a broader range of services in this field ñ particularly in areas with favourable growth prospects such as application outsourcing,î says PAC consultant Christian Glas.


In the UK, where Getronics now holds a midfield position, the enlarged company would post twice as many revenues, thus ranking among the Top 30 in the area of IT services.

From PinkRoccadeís point of view, Getronicsí position in the British market alone already makes it an interesting partner. Together with Getronics, the IT provider will strongly improve its performance in the areas of finance, retail and services. Ordina, until recently PinkRoccadeís second suitor, would also have been an attractive alternative. The IT services provider, who focuses on the Dutch market, would have enabled PinkRoccade to expand its project services business, especially the process-related offering. Experience proves, however, that the takeover of a larger firm by a small competitor always involves certain difficulties. In this respect, Getronics is better positioned. The acquisition will nevertheless be quite a challenge for Getronics in the Dutch market, where Pink is among the top players.

Christian Glas points out that it always facilitates a takeover if a companyís top management accepts the acquirer ñ Getronics, in this case. ìIn case of a hostile takeover, the top management normally has to be replaced. As a consequence, the best people often leave. This would have involved the risk of PinkRoccade losing its best human assets. Moreover the integration is more complicated after hostile takeovers.î That is the scenario Ordina would have had to deal with.

After acquiring PinkRoccade, Getronics will be the Dutch market leader and will reach the critical size in outsourcing. The realignment that is linked to and supported by the takeover, however, may have negative effects on international business, which so far has lacked development, anyway.