Tech Data purchase a big deal for Apollo

Mergers and Acquisitions
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The investment firm's $5.4bn offer promises to change everything and nothing, says Billy MacInnes

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22 November 2019 | 0

These are interesting times for the global IT distribution market. We have now reached the position where two of the biggest IT distributors in the world will no longer be independent companies. Ingram Micro was the first to go, acquired in December 2016 by Tianjin Tianhai Investment Company, a Shanghai stock exchange listed subsidiary of HNA Group. Now, Ingram’s longstanding rival Tech Data has agreed to be bought by US-based private equity firm Apollo Global Management for around $5.4 billion.

The acquisition can be seen as the end of an era for the 45-year-old distribution giant although there is unlikely to be any major upheaval in the short term with CEO Rich Hume remaining in post and the company continuing to be headquartered in Clearwater, Florida. This mirrors the situation at Ingram Micro where CEO Alain Monie has remained in situ since it was acquired.

Commenting on the proposed takeover, Apollo Private Equity co-lead Matt Nord said: “Through this investment, we are committed to expanding Tech Data’s position as a trusted partner to the world’s leading technology vendors while providing best-in-class customer service. As a private company with our sponsorship and a strong balance sheet, Tech Data will have significant financial and strategic flexibility to drive growth going forward.”

The prospect of improved strategic flexibility, agility and longer term planning which private ownership can provide when businesses are no longer locked into short term quarterly reporting cycles is an attractive proposition. Dell Technologies advanced similar arguments when the manufacturer went private in 2013.

Steady platform

For his part, Hume claimed Apollo was investing in the distributor because the Tech Data team, capabilities and global infrastructure would “provide a great platform for future growth. Their investment will enable us to accelerate our work to further differentiate and expand our end-to-end solutions portfolio and provide our channel partners with unparalleled reach, efficiency and expertise”.

He stressed that the announcement would “have no impact on our day-to-day operations… In short, it remains business as usual”.

It’s intriguing that in both situations, the businesses acquiring Ingram Micro and Tech Data have chosen not to make sweeping changes to the management of either distributor. This suggests that although Apollo Private Equity and Tianjin Tianhai Investment Company believe there is potential for IT distribution as a viable business growth area going forward, they don’t see the need for a drastic overhaul to achieve that growth.

The consensus seems to be that the best way to achieve this is with the existing management in place. Which is not only a vote of confidence in the management of the distributors but also in the distribution business per se because it suggests any changes to the business of Tech Data and Ingram Micro will be made in the context of what already exists today (and has existed for some time) rather than requiring the creation of a radical blueprint that rips up much of what has gone before. In other words, if it ain’t broke, don’t fix it.

So while Apollo’s acquisition of Tech Data is a big deal, to quote a well-worn French phrase: Plus ça change, plus c’est la même chose.

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