ScanSource To Buy $225M Cisco Videoconferencing Distributor

ScanSource is planning to purchase a 75-person specialty distributor to better align its offerings with Cisco as the vendor doubles down on collaboration tools.

Greenville, S.C.-based ScanSource said its acquisition of family-owned KBZ, which notched $225 million of sales for the 12 months ending June 30, will provide partners of both companies with greater access to financial and technical services.

"This complements our existing Cisco business very well," ScanSource CEO Mike Baur told CRN, noting that many of Cisco's top resellers going forward will be focused on video and collaboration products. "We will be a stronger distributor together with KBZ."

[Related: ScanSource's Baur: Untapped VAR Opportunities Abound In 3-D Printing, Managed Services]

Financial terms of the deal, which is expected to close by Sept. 30, were not disclosed. Excluding one-time acquisition costs, the KBZ acquisition is expected to boost profits and return on capital for ScanSource by Sept. 30, 2016, according to ScanSource.

Ken Zorzi, founder and owner of Doylestown, Pa.-based KBZ, plans to retire from the business, with his son Kyle Zorzi -- who currently oversees all sales and operations -- assuming the role of senior vice president of KBZ, a ScanSource company. Aside from Ken Zorzi, all of KBZ's employees will join ScanSource and report to Kyle Zorzi, Baur said.

The distributor plans to keep the KBZ name around for a while after the deal closes, gradually transitioning to the ScanSource brand over six months to a year after the acquisition.

Despite both enjoying a strong Cisco relationship, the two distributors have virtually no customer overlap, as KBZ is centered around videoconferencing, while ScanSource is focused on wireless and security.

KBZ was Tandberg's largest distributor before its 2009 acquisition by Cisco and continues to be the dominant distributor for Cisco videoconferencing products in the U.S., Baur said. That efforts have been recognized by Cisco, which named KBZ as its Americas Collaboration Distributor of the Year in 2014 and Americas Cloud Distributor of the Year in 2015.

Conversely, ScanSource has never resold Tandberg videoconferencing products despite being closely aligned with Cisco for roughly a decade, Baur said. ScanSource is much larger than KBZ, with roughly 2,000 employees worldwide and annual sales of $2.91 billion for the year ending June 30, 2014.

Opportunities for existing ScanSource partners to resell videoconferencing products (or for KBZ partners to resell wireless or security products) will be limited, as the most successful resellers in these technology areas tend to maintain a narrow focus, Baur said.

KBZ resellers, though, will be able to take advantage of ScanSource's reseller financial services, offering partners far more flexibility around credit terms and financing than they previously enjoyed, Baur said. And ScanSource partners can leverage KBZ's ZCare offering, which provides pre-sales, post-sales and configuration services that might be too expensive for a reseller to manage alone, he said.

KBZ also specializes in cloud services and public sector clients, Baur said, while ScanSource hasn't historically been very focused on selling to the government.

The distributor has also in recent years launched an enablement program focused on technical and sales assistance and an automated loyalty program, whereby resellers automatically earn rewards just for being customers, Naomi Harker, KBZ's vice president of marketing, told CRN in June 2014.

The KBZ deal will be ScanSource's first acquisition of 2015. The distributor announced last August that it would acquire Brazilian distributor Network1 as well as U.K.-based voice, video and data company Imago Group.

Tom Narut, director of regional sales for Gig Harbor, Wash.-based Compsee, said the KBZ acquisition won't make much of a difference for his company, as it works with ScanSource primarily around bar-coding.

Although Narut said he feels ScanSource's support around bar-coding is second to none, he said he is pleased that the distributor is taking steps to bolster technical support for its wireless and security partners.

Narut isn't holding his breath for an acquisition on the bar-coding side of ScanSource's business, as the distributor already dominates market share and has virtually no holes in its line card.

"There's really nobody left to buy (in bar-coding)," Narut said. "Our industry has been relatively consolidated over the past five years."

PUBLISHED AUG. 18, 2015