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Tech Data Buys Avnet’s IT Business in Big Distribution Acquisition

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Edward Gately**Editor’s Note: Please click here for a recap of the biggest channel-impacting mergers in July-August 2016.**

Tech Data is buying a big chunk of competing distributor Avnet, its technology solutions operating group, in a cash and stock deal valued at about $2.6 billion.

Avnet reported $26.2 billion in fiscal year 2016 annual revenue, with electronics marketing comprising $16.6 billion and technology solutions contributing $9.7 billion.

The purchase expands Tech Data’s reach across technologies and the world to establish it as “one of the world’s most diverse end-to-end global IT distributors with operations in 35 countries,” the company said. The deal is expected to close in the first half of 2017, subject to customary closing conditions and regulatory approvals.

Avnet will receive $2.4 billion in cash and 2.8 million shares of Tech Data common stock, currently valued at about $200 million.

“We are excited to announce this transformative transaction, which creates a premier global IT distributor with the most diverse end-to-end solutions from the data center to the living room,” said Bob Dutkowsky, Tech Data’s CEO. “This combination complements our value-added distribution capabilities in Europe and the Americas, while establishing Tech Data’s presence in Asia-Pacific, which will be a new market for us. As a result of the enhanced value proposition created through this transaction, Tech Data will be even better positioned to capture opportunities in next-generation technologies, deliver differentiated value to our customers and vendor partners, support career development for our employees, and generate strong returns for our shareholders.”{ad}

Tech Data expects to gain about $100 million in annual cost savings within two years after closing, primarily from efficiencies related to technology platforms, as well as duplicative functions and corporate expenses.

Maureen O’Leary, director of media relations for Avnet corporate, tells Channel Partners that “we are seeing a convergence of distribution models.”

“Technology solutions and Tech Data are complementary businesses,” she said. “By adding Technology Solutions to the Tech Data portfolio, they will be a premier global IT distributor with the most diverse end-to-end solutions which will in turn benefit partners. Additionally, this acquisition will benefit the partner community because it expands Tech Data’s value-added distribution capabilities and enhances their ability to capitalize on next-generation technologies — areas partners will be able to …

{vpipagebreak}

… leverage to grow their own businesses.”

Avnet’s technology solutions operating group serves customers and suppliers in more than 80 countries. It provides next-generation offerings, marketing, training, resources and services that span the cloud to the data center and encompass the entire IT life cycle. It works with VARs to make it “easier and more affordable to enter and excel in high-growth technology and vertical markets locally and around the world,” Avnet said.

“We believe the acquisition of technology solutions by Tech Data is the best decision for our employees, customers, suppliers and shareholders,” said William Amelio, Avnet’s CEO. “This transaction presents us with the best strategic path for Avnet’s future success and profitability, and puts technology solutions in position to achieve breakthrough business results with Tech Data. Moving forward, Avnet will focus its resources and investments on becoming a leader in design-chain and supply-chain services not only for our current customers and suppliers, but also for new markets. We will drive targeted investments in embedded solutions, Internet of Things (IoT) and critical digital platforms. By investing in these high growth areas, we can expand the breadth of our portfolio and attract new customers worldwide who depend on us to deliver world-class solutions.”

Tech Data said the purchase is the latest step to ensure it is “well-positioned to continue meeting the needs of our customers and vendor partners in an industry that is seeing significant change as a result of technology innovation and convergence.”

“While we believe there will be many reasons for our channel partners to be excited about this combination and the value that Tech Data will be able to provide as a result, it is important to emphasize that until the transaction closes, Tech Data will continue to operate as a separate, independent company and will work with our customers and vendor partners as usual,” it said.

This is the third major M&A announcement involving distributors in 2016. First, master agent Sandler Partners agreed to buy fellow master X4 Solutions. Next was ScanSource crossing the IT line to the traditional telecom side by gobbling up master agent Intelisys.


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