Industry backs Avnet and itX move

Industry backs Avnet and itX move

Distributors say the acquisition was a wise move, but aren't concerned about consolidation shrinking the market

The $77.5 million potential acquisition of itX by global player, Avnet, has been heralded as a wise move by the broader industry, which is unconcerned that the consolidation is a sign of a shrinking distribution market, or one that favours global distributors.

Avnet, a global distribution organisation, has little product cross-over with itX, said leading country manager, Gavin Lawless. The two were highly complementary organisations.

“We’ve been growing our presence significantly over the last few years, and this will increase our significance in a fairly substantial way,” Lawless said.

Express Data CEO, Ross Cochrane, agreed the acquisition was a good one for Avnet – an organisation he feels is under- represented in the local market.

“Although I don’t know where Avnet wants to be positioned in the local market, they did need more market share,” he said.

However, the absorption of an organisation of the size of itX is not one the broader industry need be concerned with, Cochrane said. Although it would be unlikely an organisation could grow to ‘fill the gap’ left by an organisation of itX’ size, the industry was still full of opportunity.

“It’ll be difficult for a new scale player to emerge, but there is room for niche disties,” he said.

Looking forward, consolidation could be expected to occur at all three levels of the supply chain, Cochrane said – amongst the large players as much as the small.

You don’t have to look far to find examples. Intel has just announced plans to acquire security software vendor, McAfee, for $US7.68 billion. Last month, there was the massive $US3.2 billion acquisition of integrator, Dimension Data, by Japanese telco, NTT

Both Multimedia Technology general manager, John Hassall and Dicker Data managing director and co-owner, David Dicker, agreed itX was an organisation ripe for acquisition.

“itX would have been a company that Dicker Data, as a public company, might have looked to merge with or acquire,” Dicker said. “Although the price Avnet is looking to pay is certainly much higher than I would have been prepared to pay.”

“The market has been in a flat space for the last couple of years and itX would have been a good one to own,”Hassall added. “I had a lot of respect for where the business was positioned, from an investor’s point of view. It had a lot of nice vendors.”

As part of the 100 per cent shares buyout process, itX would have to de-list from the ASX and the company would fall under Avnet globally, which is already listed on the New York Stock Exchange (NYSE).

Once that happens, the number of Australian-owned distributors similar in size to itX, Avnet or Express Data is reduced to just Distribution Central and Dicker Data (which is itself in the process of listing on the ASX).

Distribution Central CEO, Scott Frew, saw that as an opportunity – both for his company, and indeed other smaller Australian-owned distributors - to pick up some additional business.

“As itX is absorbed into Avnet, there will be some contracts that do fall out of that,” Frew said.

“itX was a Sun distributor, and had a bunch of software around that. I imagine that following the acquisition some of those software vendors will reassess their go-to-market. That’s an opportunity. There are some 200 distributors in Australia – there’s plenty of small fish out there.”

The small number of large Australian distributors is also no indication that it’s a difficult environment to compete against global players, Frew said.

“It’s only an issue in the cases where a global integrator wants a global distribution partner,” he said.

Julia Talevski contributed to this report.

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Tags sunMultimedia TechnologyAvnetDicker DataitXExpress Datadistribution central


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