Magnos Holdings, a new company set up to buy enterprise storage resellers, has made its first acquisition: Solid State Solutions (S3). Terms are undisclosed.

S3 is based in Hampshire and its founder-owners, Roger and Lorraine Smith, are to retire from the business. But they will stay on for now as consultants to ensure a smooth handover.

Set up in 1988, S3’s customer base is predominantly in the South East. Its vendor roster includes Symantec (Veritas), ADIC, StorageTek, Hitachi Data Systems, Network Appliance, Spectra Logic and InTechnology.

Barry Jones, business development director of Magnos, said he bought S3 “because it was available”. More importantly, it produces good margins and has the best revenue per head – “by a long chalk” – of any company he has investigated so far in the UK enterprise storage channel.

There are too many storage resellers operating at the same level, resulting in too much cost in the supply chain, and struggle to make good margins, according to Jones. This makes the sector ripe for consolidation. "Storage is growing and will continue to grow, and there will be good margins, so long as you offer good added value services. You cannot build a strategic business around box-shifting," he said.

Magnos funded the S3 deal through “private resources and bank borrowings”. Another small potential acquisition in the wings will be funded in the same way. Beyond that, “negotiations with sources of corporate finance – who share our vision for consolidation in this sector – are well advanced.”

Jones aims to built a country-wide operation, which would mean three or four branches across the UK.

Magnos Holdings is born out of Magnos Consulting, a three-man consultancy based in Harrogate. Jones, who has been in IT for an “embarrassing number of years” is a channel veteran, at one time running DEC’s European VAR team in the 1980s. ®