Tech Data surprised the channel Monday with its announcement that it was spending $2.6 billion (U.S.) to acquire fellow distributor Avnet Technology Solutions, the largest IT distribution deal in history, and a move that will put Tech Data almost on even footing with rival Ingram Micro in terms of overall size.
The deal, which includes $2.4 billion (U.S.) in cash and 2.8 million shares of Tech Data stock, currently worth about $200 million, will see Avnet exit the IT distribution market, while Tech Data grows its value-oriented distribution business and gets a foothold in new markets, most notably Asia Pacific, where it was not previously a major player.
“It’s a great opportunity to expand Tech Data’s breadth and capabilities in the data centre, to expand our strength in Europe and the Americas, and to add Asia Pacific as well,” said Rick Reid, president of Tech Data Canada. “The timing is perfect, and we’re very similar companies from a values perspective. We’ve always said that we like to participate in the value-added distribution space, and this allows u to do so in a much bigger way.”
Once Avnet Technology Solutions is on board, Reid suggested that Tech Data will have firmly established itself as “much closer to a VAD than a broadline distributor,” with a firm focus on data centre and cloud infrastructure.
Tech Data Canada has some experience with the mergers and acquisitions game, having itself purchased Globelle in 1999, early in Reid’s run with the distributor. Reid said from that experience, he learned that when it came to integrating an acquisition, it is best to “listen, learn, and do it fast.” And that’s exactly the model Reid intends to use when it comes to bringing the Avnet Technology Solutions Canada team into the fold.
He’s aided by geography — as fate would have it, the two distributors are literally across the road from one another in Mississauga. Reid quips that when asked about the geographic impact of the then-potential deal by the Tech Data executive team at headquarters, he noted that he could hit Avnet’s offices from his office with his pitching wedge.
“And I’m not a very good golfer,” Reid added.
Reid was very complimentary to Avnet Canada’s team, headed up Brian Aebig, and said that in acquiring them, Tech Data Canada’s team gets stronger through the addition of good people. Moving fast, he said, will be key to keeping as many of those good people as possible.
“There’s always a little bit of trepidation in these kinds of situations, but we’ll sort through that,” Reid said. “You’ve got to put the organization in place early. I’m not sure you get it all right at first, but you’ve got to get at it and start executing.”
Reid said it was too early to say what the integrated organization would look like structurally, or even who will be leading the integration teams on either side, either locally in Canada or on a global basis.
Reid has long been critical of the Canadian market as being “over-distributed,” but says that with this deal, it’s “less over-distributed than it was” before, citing also the distributor’s acquisition of Hartco’s distribution business, and back to the Globelle deal nearly 18 years ago.
Of course, his peers have also played a role in the consolidation of distribution in Canada, including Synnex’s purchases of EMJ Data Systems and Supercom.
“Maybe that’s my mandate — to reduce the number of distributors in Canada,” Reid joked, before adding that he believes there’s still additional consolidation to happen in the distribution game.
“In the world of distribution, bigger is always better,” Reid said. “And we’ve just become materially bigger in the areas we’re focused on.”
The deal is still subject to regulatory approval, but is expected to close sometime in the first half of 2017.