Tech Data and Synnex will come together to create a $57 billion (U.S.) distribution giant in a deal worth approximately $7.2 billion, the two companies announced Monday morning.
Synnex shareholders will own 55 percent of the combined distribution giant under the deal, while Tech Data shareholders (Apollo Global) will get 45 percent. Current Tech Data CEO Rich Hume will lead the new distribution giant. Current Synnex CEO Dennis Polk will become Executive Chairman, and Synnex will control six of eleven board seats.
In a conference call announcing the acquisition, Polk said that the two distributors coming together “accelerates our strategic growth initiatives by several years over what we could have done” through multiple smaller purchases.
“We believe that combining our business with Synnex accelerates growth better than either company could achieve independently,” Hume said, echoing Polk’s comments.
While the two companies have a similar backstory of traditional broadline distributors that have evolved with the times and expanded the types of products and services, Polk said Synnex and Tech Data are actually “very different in geography, focus areas, and markets served.” Hume offered several examples of growth options worldwide, such as Synnex having a solid presence in Japan, while Tech Data does not. Tech, meanwhile, is well-established in Europe, while Synnex is “more limited” in that continent.
“This reach across products, services, and geographies will provide purchasing efficiencies to our customers and vendors,” Hume said. “We will have the most comprehensive portfolio in the market with over 200,000 products.”
If you’re curious which of the two iconic distribution brands will survive, you’re not alone. Hume said the two companies “have not even begun to embark on a discussion” about the name or branding for the combined company on the conference call. Stay tuned for more details on the identity as Synnex and Tech Data work through their integration plans.
Of course, integration plans are familiar, if daunting, details for both parties. Polk noted both companies have “a wealth of knowledge on how to have a successful outcome” of an acquisition. Each side has familiarity with gobbling up another large distributor, with Synnex acquiring Westcon and Tech Data purchasing Avnet Technology Solutions, both in 2017.
“We’ve both shown we can transition IT systems very well,” Polk noted.
The merger is expected to close in the second half of this year, pending regulatory approval.
In the conference call, which also served to announce Synnex’s first-quarter results, Polk said the company enjoyed solid performances in all of its regions but called out great results out of Japan and Canada. Polk noted that the business in Japan had been buoyed by an effort to ensure every school-age child in the country has a computer; he said growth in Canada has “been because of continued execution over the past year-plus that caused our Canadian team to execute above expectations on a consistent basis.”