**Editor’s Note: Please click here for a recap of the biggest channel-impacting merger and acquisition news from April.**
Distributor Synnex Corp. announced on Tuesday a definitive agreement to acquire value-added distributor Westcon-Comstor‘s Americas and Latin America business in a $600 million deal. This includes the U.S., Canada and Latin American markets, as well as a 10 percent international investment in Westcon-Comstor EMEA and APAC businesses.
This acquisition not only strengthens Synnex’s position in North America but also expands the distributor’s footprint in Latin America – and with the EMEA and APAC business agreement – creates a global business opportunity for partners. The complementary business transaction will add $2.2 billion of revenue and profit margins to Synnex as a result of this process, the company stated.
“This transaction supports our strategy of shifting our business to where technology is headed,” said Kevin Murai, president and CEO of Synnex, in a prepared statement. Westcon-Comstor brings to the table a solid position in the security, UCC and networking markets, which are complementary to Synnex’s portfolio, he added.
Diane Krakora, CEO of PartnerPath, the partnering development consulting company, isn’t surprised to hear about the acquisition, having seen several other operationally driven acquisitions over the last couple of years.
“The distributor business value proposition is getting tougher as the industry moves to cloud consumption models. It’s good for Synnex and Westcon as they get economies of scale and additional reach by combining efforts,” she told us.
From the partner perspective, there’s a bit of a negative impact when there’s less competition for their business.
“They will have fewer options for distributors, which means they will be a bit more beholden to the few left standing. And, with acquisitions, change is inevitable and that always brings uncertainty to the channel partners, as they have planned the next three years of their business-model growth on the current market situations,” Krakora said.
At the same time, assuming there’s significant overlap in the partners that have relationships with both organizations, partners will have more access to products and services from the combined strength of Synnex-Westcon, she added.
Given the scope of its business, Synnex says there will be some level of overlap in partners and customers; however, given the specialty business of Westcon-Comstor, which sells into the high end of communications security, the transaction will result in a number of net-new customers for Synnex.
Seventy-seven percent of Westcon-Comstor’s $2.2 billion FY2017 revenue is generated in North America, and 23 percent in Latin America. Forty-eight percent of North American and Latin American revenue is driven by security sales, 32 percent Cisco sales, 15 percent UCC sales, and 6 percent other, according to information provided by Synnex.
Murai addressed the complementary nature of the two distributors’ markets by technology, vendor relationships and end markets served, as well as geographic footprint. The acquisition will add about a dozen select and net new technology vendors to Synnex — Cisco, Check Point, Fortinet, FireEye, Juniper, Avaya and Polycom, to name a handful.
Here’s how the end markets served by the two distributors looks: Synnex — SMB, public sector, retail, and enterprise; and Westcon Comstor — enterprise, global service providers and federal.
“Given the highly complementary technologies, vendor relationships, markets served and geographic footprint, you can see why this deal is a win-win not just for Synnex and Datatec shareholders but for all stakeholders, including our current and prospective partners and employees, worldwide,” Murai said.
The deal is expected to close in the third (calendar) quarter of this year, subject to customary closing conditions and regulatory approvals.
Today’s news follows months of rumors about the potential sale of Datatec’s Westcon-Comstor distribution business. Datatec Ltd., the parent company of Westcon Group, is a $6 billion global ICT solutions and services group with more than 8,000 employees worldwide. Datatec operates three core divisions — distribution through Westcon Group, Westcon Comstor; Logicalis for integration and managed services, and Analysis Mason and Mason Advisory for consulting and research.