Like the fabled train, CrossOff Inc. says it has become the little company that could.
The Halifax-based technology company signed a memorandum of understanding with IBM Canada Wednesday to acquire Polar Bear Software Corp. (PBSC), and, in doing so, expanded eight-fold.
This is the third, and by far the largest acquisition the anti-counterfeiting, brand protection, technology training and property management company has made. The acquisition will result in a merger of PBSC with the business of Broadleaf Technology Solutions, the training and consulting division within CrossOff. And, since IBM has been attempting to sell PBSC for about three years, it makes for an interesting acquisition, said an IDC Canada analyst
“There has been a lot of internal struggles and turnover and they have gone through a lot of different management groups and profitability has been quite low,” said Julie Kaufman, research manager skills research at Toronto-based IDC Canada, referring to PBSC. “IBM’s strategy has been to fix it up for the last couple of years to the point where someone would buy it.”
PBSC, a group of corporate IT training firms owned by IBM and worth about $38 million in revenues annually, didn’t fit into the international IBM education model, said Tom Whyte, general manager at IBM Canada Learning Services.
“IBM Canada is the only IBM country that offers desktop application training as part of our portfolio of learning offering,” Whyte said. “This allows me to align my portfolio of learning offerings with the rest of what IBM Global Services has throughout the world. We are still in the learning business and IBM’s strategic direction is to invest in e-learning solutions and IBM Canada’s learning services business unit will continued to be a force in offering e-learning solutions.”
Whyte said he didn’t know if CrossOff would be changing any of the PBSC’s educational offerings, though he speculated that the company would probably build on what’s there already.
Mike Hayes, vice-president of marketing at CrossOff said that while this is no small endeavor, it isn’t quite as drastic as it seems.
“If you look at Broadleaf as an operating division and look at the pure revenues coming out of there, it does look a little like David and Goliath,” he said from his Halifax office. “If you look at the way CrossOff is built, we have some central services that service some of our other divisions. We have a lot of bench strength. We have ourselves built to be a large company and this just helps to get us there faster.”
PBSC will remain IBM’s source for desktop application training to IBM Canada’s employees and a co-marketing agreement will enable IBM to include PBSC offerings as part of IBM’s solutions offerings. The transaction should be closed in early 2002.
That last step for CrossOff, Hayes said, is just another one in “closing the skills gap.”
“As you know, it’s a good business right now,” he said. “It has great depth and clout and they have been a great competitor for us for some time now.”
Hayes continued that the companies complemented each other very well geographically with CrossOff’s presence in the east and PBSC’s everywhere else.
“Now we can offer coast-to-coast service for our clients,” he said. “That’s always been our dream.”
Speed will be one of the keys to making this deal successful, Kaufman said, explaining that CrossOff will have to work to integrate the new company quickly because it’s important that the company is profitable soon to cover some of its new costs. CrossOff will also face some other hurdles in the coming months, she added.
“A big company has been bought by a very small company so I am not quite seeing where they see opportunities for staff,” she said. “They are going to have to worry about keeping the good people they have. Who is going to be calling the shots? Their entire company at the end of 2000 was only $5.2 million. They will be growing times seven and leveraging themselves to the hilt.”
Kaufman added, however, that PBSC has a fairly stable client-base and that will prove good for CrossOff.
“We knew this was coming, it was just a matter of who,” she said. “PBSC simply doesn’t fit into IBM’s business model around learning. The offering doesn’t fit where IBM wants to take its corporate learning business.”
Winnipeg-based PBSC is at http://www.pbsc.com
Halifax-based CrossOff Incorporated is at http://www.crossoff.ca
Toronto-based IDC Canada is at http://www.idc.ca