Westcoast Acquisition Secures ALSO Group’s Spot In Distie Big League

The channel is reacting to the acquisition of two big names in European IT distribution: Westcoast and Exclusive Networks.

First, top three European distributor ALSO Group is acquiring assets from Westcoast, a major player in the UK, for an undisclosed sum. Established in 1983, Westcoast’s turnover in 2023 was £4.2 billion (US $5.4 billion). ALSO is buying Westcoast’s operations in the UK, Ireland and France in a cash and share deal with Westcoast chairman and owner Joe Hemani.

The deal will propel ALSO to a top five distributor globally by revenue, according to Canalys figures. Combined 2023 pro forma sales of $16.6 billion put the company behind industry giants TD Synnex, Ingram Micro, Arrow Electronics and Digital China.

Hemani will become one of the major shareholders in ALSO, with Westcoast maintaining its brand name. Westcoast’s operations in Germany and the Netherlands will remain under Hemani’s leadership.

Westcoast's Joe Hemani

“Over the last 42 years, our company went from strength to strength. And this is how it will remain in the future,” said Hemani. “The continuity of the business, which is paramount for vendors, customers, and our team alike, is secured with this move.”

In a LinkedIn post, Westcoast executive director, Alex Tatham announced his departure from the company. He described the acquisition as “a new era for Westcoast and one for me too.”

Related:‘I’m Back!’ Alex Tatham Makes Surprise Return to Westcoast

Meanwhile, publicly listed cybersecurity distributor Exclusive Networks is set to move under private ownership. It has received a binding offer from private equity firm CD&R, along with existing majority shareholder Permira, valuing the business at around €2.2 billion (US $2.4 billion.)

They will acquire a majority share in Exclusive at €24.25 (US $26.28) per share. Exclusive’s board has unanimously backed the plan, which will still have to go through the statutory approval process.

Westcoast Acquisition Could Prompt More Activity

Both acquisitions reflect some prevailing trends shaping the future of technology distribution, said Alastair Edwards, chief analyst at Canalys, an Informa company. (Informa also owns Channel Futures.)

Edwards pointed out that ALSO effectively acquiring majority ownership in Westcoast gives it a substantial boost in European scale. He said ALSO has faced significant growth pressures over the last 18 months, with full year 2023. First-half 2024 sales fell by more than 11% on weak hardware sales, and profits declined.

“Future volume growth will increasingly be concentrated in the hands of fewer, larger players,” wrote Edwards in a post. “Westcoast brings ALSO a highly successful volume distribution engine, with many synergies between the two companies.

Related:Latest Channel-Impacting M&A: US Signal, Fortinet, Juniper Networks

Canalys believes that the deal could also could prompt a wave of renewed acquisition activity across Europe, with regional competitors, including Esprinet and Copaco facing growing challenges.

Edwards noted that ALSO’s investors have welcomed the Westcoast move, adding to an already impressive growth of more than 40% in share price.

Exclusive Networks Will Look to Grow with Private Equity

On Exclusive’s acquisition by private equity, Edwards said the distributor has struggled to drive up its valuation in the three years since its IPO in 2021. This is despite hitting sales of €5.1 billion (US $5.5 billion) in 2023 and generating consistently strong single or double-digit growth each quarter.

In 2022, Exclusive Networks CEO Jesper Trolle told Channel Futures that “making the transition from a private company to a public company is quite the effort. It puts a lot of stress on the organisation, particularly the finance functions. There are a lot of additional disclosures we need to make their new, more aggressive deadlines. And there’s just more visibility into the business. That transition is something that, frankly, could derail any company.”

Related:Register for This Fall's Canalys Forums in Miami, Berlin, Bali

Despite this, he maintained that the company still “managed to deliver in both sales and our income is a great testament to the solid business that we are in.”

Now, Edwards says that “quarterly shareholder demands for short-term returns can inhibit the ability for specialist distributors to make longer-term bets on new vendors and technologies, and at risk of losing share to more agile, privately held competitors. Adapting to new business models and threats – including the rise of hyperscaler marketplaces – requires the flexibility and scope to innovate.

“Exclusive has fallen behind some competitors in developing next-generation digital platforms. It has expanded globally through acquisitions but without growth in share capital, the opportunity to continue acquiring is limited. Under private ownership, the company will hope to strengthen this ability to both innovate and grow.”