The VAR Guy

If you’re about to sell your company or acquire another solutions provider, congratulations. But The VAR Guy also offers this timely warning: Never forget the implosion of marchFIRST, a failed solutions provider formed by the merger of Whittman-Hart and USWeb/CKS.

Whittman-Hart in the 1990s was a successful, steady-growing IT consulting firm. But the dot-com boom delivered a fatal distraction that ultimately killed the company. In 1999, eager to cash in on the Internet craze, Whittman-Hart acquired USWeb—a Web design and strategy firm—for nearly $6 billion.

Initially, the resulting company had annual revenues of $500 million. But USWeb was a roll-up, formed by multiple acquisitions. It focused on hyper growth rather than real profits. Imagine throwing Accenture’s boardroom together with a bunch of GenX kids who could design fancy web pages. That was the situation within marchFIRST. The company imploded and its assets were liquidated in mid-2001.

Fast forward to the present. The channel is enjoying reasonably strong demand for IT services. Software as a service is finally gaining traction. Many VARs are tempted to embrace managed services. It’s wise to investigate the market for potential acquisitions. But don’t let fast-growth opportunities blind you. Continue to trust the financial metrics that made your business successful in the first place. Rapid revenue growth is nice. But not if you bleed red ink in the process.