As mergers and acquisitions take centre stage, and new technologies flood the market, 2016 is fast becoming the banner year for channel change.
But as the sun comes down on Scott Frew’s Distribution Central empire, and the industry dust settles across Australia, one overriding question remains; Why now?
“You never want to be in ‘have to sell’ mode, because that’s when it all falls apart,” says Frew, speaking exclusively to ARN following Arrow Electronic’s acquisition of Distribution Central, for an undisclosed sum.
Amidst a multi-million dollar acquisition, however, lies a multitude of questions.
“Why now? Distribution Central is a very profitable business so in that respect there was no mad panic to sell, because as long as it was making money, I was in no hurry to sell,” adds Frew, who admits the growth of asset renewal platform iasset.com, forced his hand.
“iasset.com is running two global distributors and a handful of smaller ones so that changed the game. For the global distributors, they see me as owning iasset.com but also still owning a distributor in Australia, which is competitive to its business across Asia-Pacific.
“So, politically, the pressure has been on to become independent because I potentially had a conflict of interest in running data for global distributor firms.”
While laughing that he has “better things to do in my life than look at other people’s data”, Frew understands that for iasset.com to realise its true potential on a global scale, Distribution Central would have to make way.
“It nearly killed a massive deal for iasset.com in the US so I made commitments to exit Distribution Central within a reasonable timeframe,” he said.
“During the past few years, as iasset.com has secured bigger and bigger deals, it has been mentioned that ‘Oh, Scott still owns a distributor in Australia’, which could cause potential problems down the line.
“But now that I’m removed I can sit back and run the iasset.com engines across the manufacturers, distributors and resellers as an independent software vendor, rather than a distribution owner.”
As an industry leading B2B software-as-a-service company, Frew’s global customer base for iasset.com now represents the management of over $10 billion in assets across various companies throughout the channel.
Including assets and contracts to manage hardware, software and maintenance renewals, the San Francisco based company - co-founded by Frew in 2009 - continues to develop at a rapid market rate, thus triggering Frew’s decision to ultimately sell, rather than IPO.
“We started gearing up for an IPO,” admits Frew, who plans to move to the UK next month to help facilitate the growth of iasset.com.
“But the biggest problem is that I need to move to the UK to continue building iasset.com, and that wouldn’t be possible through an IPO as I’d be required to stay on with the company.
“To be honest, we did start moving in that direction but it still wouldn’t remove the perceived conflict of interest, and from my perspective a trade sale is always the better option.
“There’s no point buying me because I’m an entrepreneur and as much as I love the team at Arrow, if I’m sitting under anyone I just fail.”
For Frew - speaking as an ARN Hall of Fame inductee - when a company such as Distribution Central arrives at this stage of development, this is the moment the interest wanes.
“I lose interest,” he said. “When it becomes about corporate and compliance and all that stuff I prefer to move on. At the end of the day I can build things others can’t build and that’s why I need to get back on the street because that’s where I’m best.”
As with any large merger or acquisition in the channel, the knock on effect for distributors, vendors and resellers can be crammed with opportunity, or fraught with challenges.
With both winners and losers expected from the acquisition, Frew believes Distribution Central - and all it encompasses - will be strengthened by the deal, with the company’s 130-strong team a key factor in the decision-making process.
“I can’t talk for Arrow, but the reason I picked Arrow to be the acquirer is because they need everyone of our staff on the ground in Australia,” adds Frew, referring to Distribution Central’s seven staffed offices in Australia and New Zealand.
“If one of the local global distributors had been the acquirer, it would have destroyed operations and accounts and that was a key consideration.”
Pausing when saying “our staff” - “I keep forgetting, I don’t own the company anymore” - Frew says his chief concern was to ensure the “blood, sweat and tears” of his expanding workforce did not only go to waste, but remained intact, rewarding 12 years of loyalty and dedication in the process.
“They have growth plans and with Hewlett Packard Enterprise coming on board, and a few other big deals in the wings, they will need the current crop of workers and more,” he adds.
Drawing on over 25 years of experience in the technology industry, Frew is widely recognised as a pioneer in the Australian networking channel.