It’s not often we see VARs go public. Traditional reseller business models have difficulty scaling up because of their commodities-based revenues. One of the few ways to grow a VAR practice is to add new employees, and the increased cost often offsets any growing profits.
The result is typically a lackluster reception from Wall Street, which likes to develop a widget once and stamp it out repeatedly over a period of time. But today, the Wall Street Journal reports that IT solution provider Presidio Holdings is reportedly considering filing for an IPO as early as this week, valued at approximately $3 billion.
It’s been a very slow year for U.S. IPOs, especially in the tech sector. Dealogic reports that only 104 companies have gone public in 2016. We didn’t see the first tech IPO until the end of April, when Dell spun off its SecureWorks security business unit into a public company in order to help finance its $67 billion acquisition of EMC.
Last week, Denver-based Optiv Security submitted its S-1 filing with the SEC with a fundraising target of $100 million. Though making the transition toward a service-based model, Optiv still operates in large part as a traditional VAR. It was formed early last year by the merger of Accuvant, backed by Blackstone Group (BX), and FishNet Security, backed by InvestCorp. Together, the two entities had revenues totaling $1.5 billion in 2014.
It’s too soon to call this a trend, but it makes sense that we’ll see an increased number of IPOs from traditional resellers as they shift toward services and solutions. Automation tools and cloud technology make scaling a tech business easier and less expensive. The digital transformation that’s changing the face of business in almost every industry, then, seems to be starting to impact the IPO space as well.