Breaking Down the Tech Data-Synnex Merger, Market Impact
The combination will make it easier for vendors and customers to do business.
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Channel Futures: Why this Tech Data-Synnex combination? Is there much overlap between the two companies?
Synnex’s Bob Stegner: That’s the ideal thing about it. There’s not a lot of overlap. OK, so obviously we don’t know everything yet because we can only share so much information. But from a geographic standpoint, there is not a lot of overlap. And then even on the customers, a lot of times the customers may buy more from one than the other. We’re finding out we both have customers the other doesn’t have or they have a just a lower amount. But that’s going to be one of the big things.
The other thing is this does not change our strategic position. Synnex has been looking at wanting to expand for awhile … and Tech Data did as well. They tried this before when they bought Avnet. I think what’s nice is rather than just going out and trying to buy multiple companies, by the two of us merging, it allowed us both to reach the goals that we both had. We’re going to have a lot to say when we become the world’s largest distributor with $56 billion.
Channel Futures: Is this going to shake up the distribution competitive landscape?
Synnex’s Bob Stegner: Well, of course. Any time you have any type of a merger or sale, it shapes up the landscape, whether it’s just one reseller in his market, it shakes up. But in this case, hopefully it’s not going to shake it up too much. It’s going to make it easier for the reseller and the vendor to do business.
Channel Futures: Is there any reason for vendors to be concerned about how the Synnex-Tech Data merger will impact them?
Synnex’s Bob Stegner: We’ve talked to multiple vendors and customers, and all the feedback has been extremely positive.
CF: Will the two companies’ partner ecosystems be combined? If so, what will be the process and timeline?
BS: It’ll close in the next six to nine months, and then you look at systems. We have different systems, but it could be possible we may go with ours to save dollars because we have a very robust system. But until then, we’re going to obviously operate separately. And it will be interesting to see after the six to nine months how soon we start trying to blend things together. You’re blending together two very large companies.
Channel Futures: Is this merger indicative of any trends that are taking place in your industry?
Synnex’s Bob Stegner: You never know, but I don’t see a lot more expansion from our standpoint because this kind of checks all the boxes for Tech Data and for Synnex as far as geographic reach, vendor offerings and customer breadth.
CF: Any challenges ahead once the deal closes?
BS: There are always challenges, but both of us have been through this before, them with Avnet and we brought back Westcon Comstor. And you go back when we really expanded our Concentrix, which has since spun off, this isn’t new to either of us. We both have purchased other companies and blended them in. There are challenges with everything. But the good news is I think that we’re both well-versed in blending companies together.
Synnex says the combined company will offer more value and buying efficiencies to its 150,000 customers and more than 1,500 vendors. In addition, it will enable it to accelerate technology adoption and attract the world’s most innovative OEMs.
Jay McBain, principal analyst of channel partnerships and alliances at Forrester, said he predicted the Synnex-Tech Data merger would take place just a few weeks ago.
“The private equity folks are looking at $200 million in ‘synergies’ to make the deal make financial sense,” he said. “There are some strong product and geographic complementary elements to the deal. But places like North America will feel the brunt of sales/marketing/distribution centers (warehouses)/operations/finance overlap. The scale piece is important as well. Becoming the largest will command more attention and higher (potential) investments by their largest suppliers.”
In stark contrast to the massive growth of IaaS, SaaS and emerging technology subscription-based providers, traditional IT distributors are seeing flat revenue growth, McBain said. Tech Data reported a 3% loss before being taken private by Apollo Global Management last June. And Synnex reported 4.2% growth after announcing a split into two public companies.
“The bulk of distribution revenue comes from categories that don’t deliver rapid response to constant change, which suggests that headwinds for the global distribution industry will continue throughout 2021 due to the ongoing effects of COVID-19,” he said.
Tech Data said this is a “transformational transaction” for it, Synnex and the entire technology ecosystem.
“Synnex and Tech Data have proven track records, and together, we will be well positioned to expand strategic partnerships around the globe, invest and grow in next-generation technology initiatives, and set the industry standard in anticipating and responding to channel partner needs,” the company said. “We both share values-driven corporate cultures, and with our combined workforce, we will build on our ongoing transformation efforts, and realize our ambition to provide our channel partners with unparalleled reach, efficiency and expertise.”
Next-generation technology initiatives include cybersecurity, cloud, data and IoT, and everything as a service (XaaS).
Eagle said this is an “incredible” step forward for Tech Data and accelerates its transformation.
“We will be able to do more together, leveraging the strengths of both companies to provide best-in-class solutions and service to vendors and customers,” he said. “Tech Data and Synnex have complementary businesses, and both companies have proven track records of integrating acquisitions through our value-driven corporate cultures. We expect these shared values, as well as the expertise and talent from both organizations, will support a smooth integration following the close of the transaction in the second half of calendar year 2021.”
Eagle said this is an “incredible” step forward for Tech Data and accelerates its transformation.
“We will be able to do more together, leveraging the strengths of both companies to provide best-in-class solutions and service to vendors and customers,” he said. “Tech Data and Synnex have complementary businesses, and both companies have proven track records of integrating acquisitions through our value-driven corporate cultures. We expect these shared values, as well as the expertise and talent from both organizations, will support a smooth integration following the close of the transaction in the second half of calendar year 2021.”
This week started off with a massive channel shake-up. The planned Tech Data–Synnex merger creates the world’s largest distributor, as the latter buys the former for $7.2 billion.
The combined company will be a $57 billion distribution giant, leaving $40 billion Ingram Micro in the dust. It will serve businesses in more than 100 countries across the Americas, Europe and Asia Pacific. Additionally, its portfolio will comprise more than 200,000 product offerings.
Apollo Global Management affiliates and its co-investors now own Tech Data. The massive transaction should close in the second half of the year.
Rich Hume is Tech Data’s CEO.
“The combined company will deliver superior value for shareholders, offer our customers and vendors exceptional reach, efficiency and expertise across the entire technology ecosystem, and be an employer of choice in the IT industry,” he said.
Bob Stegner, Synnex’s senior vice president of marketing for North America, gave us the lowdown on the Tech Data-Synnex merger and what it will mean for the evolving distribution market.
Channel Futures: What will this merger mean for Synnex partners and what do they need to know about it?
Bob Stegner: The thing they need to realize is that for the next six to nine months, it doesn’t mean anything, because we can’t do anything until the deal closes and we anticipate it closing at the end of, maybe the latter part of this year. But we don’t know that for sure. We don’t anticipate any issues. When it does close, I think it’s going to really make it easier for the customers to do business because Tech Data has some vendor lines that we don’t have and vice versa. So that’s going to allow them to do one-stop shopping for a total solution. And between the two companies, we should have all the vendors that they need.
It’s probably going to change their credit lines for the positive, because there’s only one company they’re dealing with. And as far as what they need to know, there’s not much — not until it’s done. That’s the most difficult part. But I do think it’s going to be a good thing for customers because it is the geographic regions. An ideal example is we’re in Japan and they’re not. They’re in Europe; we’re not. So there are a lot of synergies there from a geographic standpoint.
It’s really going to make the customer a lot easier to be able to do business with.
Our slideshow above has more of Stegner’s thoughts, as well as more facts about this monster merger.
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