Tech Data has entered into a definitive agreement to acquire the Technology Solutions business from Avnet, in a transaction valued at approximately $US2.6 billion.
Representing the distribution giant's first foray into the Australian market, with Technology Solutions, Tech Data will stand tall as one of the world’s leading IT distributors with operations in over 100 countries.
“This combination complements our value-added distribution capabilities in the Americas and Europe, while establishing Tech Data’s presence in Asia-Pacific, which will be a new market for us,” Tech Data CEO, Bob Dutkowsky, said.
“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.
“Tech Data has competed with and admired Avnet Technology Solutions for many years. We’re thrilled to start this journey together and are confident that our customers, vendor partners, employees, and shareholders will appreciate and benefit from the value that we will bring to the market."
In Australia, the deal is set to send shockwaves across the channel, with the move significantly extending the local reach of the world’s second largest distributor, continuing its long-time global rivalry with Ingram Micro in the process.
With Technology Solutions, Tech Data will establish an immediate presence in the Asia-Pacific region, which will be a new market for US-headquartered organisation.
As an operating group of Avnet, Technology Solutions delivers technology services, software, hardware, and solutions across the data centre, which complement Tech Data’s portfolio of offerings and strategic areas targeted for growth.
Across the world, the Avnet division partners with more than 40 of the world’s leading IT vendors, servicing over 20,000 customers in more than 80 countries.
With the deal expected to close in the first half of calendar 2017- subject to customary closing conditions and regulatory approvals - the sale of the business provides both Avnet and Tech Data with immediate opportunities to focus on core strategies and scale their respective businesses.
“We believe the acquisition of Technology Solutions by Tech Data is the best decision for our employees, customers, suppliers, and shareholders,” Avnet CEO, William Amelio, added.
“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.”
While this move significantly improves Tech Data’s data centre presence in Australia, naturally, the industry will be waiting to see how the deal plays on a greater scale.
With over 50,000 daily transactions globally, spanning 105,000 customers across 100 countries, Tech Data is a true distribution giant, working with leading vendors such as Apple, Cisco, Microsoft, and HP.
Through selling over 150,000 IT products, Tech Data generated $US26.4 billion in net sales for the fiscal year ended January 31, 2016, and is ranked No. 108 on the Fortune 500.
The acquisition finally puts to bed long-held rumours of the organisation’s appetite for the Australian market, subsequently placing rivals Ingram Micro, Synnex, Arrow (Distribution Central), and Westcon-Comstor under threat, alongside Dicker Data - which was often touted as Tech Data’s route to market through acquisition locally.
Looking ahead, Dutkowsky said the acquisition “significantly broadens” the organisation’s value-added distribution business, with Technology Solutions an “established leader” in delivering technology solutions, services, software, and hardware across the data centre.
Currently, Tech Data's data centre business is well-established in Europe and has a growing presence in North America.
Overall, these regions represented approximately 61 per cent and 39 per cent of Tech Data's fiscal year 2016 revenues, respectively.
With Technology Solutions however, Tech Data will expand its operations from 21 to 35 countries worldwide, with Europe comprising 53 per cent of the company's $35 billion pro forma revenues, the Americas 44 per cent and Asia-Pacific three per cent.