Distributor Ingram Micro Snapped Up by Platinum Equity

Speculation about Ingram Micro being acquired is over. Platinum Equity on Wednesday said it entered a definitive agreement to buy the distributor from HNA Technology Co. Ltd, a part of HNA Group, for $7.2 billion. China-based HNA Group acquired Ingram Micro in December 2016 for $6 billion. Expect the sale to close in the first half of next year.

In August, Bloomberg reported that the U.S.-based equity firm was in talks to acquire Ingram Micro. There were news reports, earlier in the year, that HNA Group was in poor financial straits and the Chinese government was overseeing HNA Group’s liquidity risks.

Platinum Equity’s Tom Gores

“Ingram Micro is an industry leader, one of the largest companies in the world, and will be a cornerstone investment in our portfolio,” said Tom Gores, chairman and CEO, Platinum Equity. “We have the resources and the expertise to help the company pursue an aggressive agenda of growth and transformation.”

Ingram Micro Weighs In

The distributor issued the following statement from Paul Bay, executive vice president, Global Technology Solutions, Ingram Micro.

Ingram Micro’s Paul Bay

“Platinum shares Ingram Micro’s focus on associate and partner experience, and they recognize the importance of relationships and partnering to do more and deliver value. I believe this partnership with Platinum will allow us to become an even more indispensable business partner to our channel partners globally. My team and I are looking forward to partnering with Platinum to accelerate our growth plans, which are to win together with partners, deliver a better customer experience around technology and deliver more high value, high growth business solutions. I’m in this for the long term to support our partners with giving businesses more ways to run better, grow faster and do more for the customers they serve.”

Alain Monie, Ingram Micro CEO, will reportedly stay on after the sale. And, according to Ingram Micro all executives will remain on board.

The Upside

M&A activity in IT distribution has been hot for several years. Most recently, Apollo Global Management closed on an approximately $750 million deal to acquire Tech Data. The 45-year-old Tech Data acquisition deal went final in June 2020.

Canalys’ Alastair Edwards

Chief analyst Alastair Edwards, Canalys, sees the Ingram Micro acquisition as good news for IT distribution.

“Ingram’s high valuation is a resounding endorsement of the value of distribution, and highlights how that value has increased during the crisis,” he said. “This finally brings to an end questions over Ingram’s future and financial stability for suppliers and channel partners, which will be a huge relief.”

He points out many positive implications across the supply chain. For example, vendors will now be able to invest with Ingram with greater confidence, and channel partners – particularly in the U.S. – will benefit from a U.S. owned Ingram.

“U.S ownership will ease concerns in the West over Ingram’s links to the Chinese state via HNA,” said Edwards. At the same time, the sale to Platinum is likely to weaken Ingram’s position in China. “But under HNA Ingram has largely failed to capitalize on its opportunity in China.”

Platinum Equity’s Gore talks about pursuing an aggressive agenda and growth initiatives. Industry watchers like Edwards expect the new owner to support deeper, longer-term investments in Ingram’s higher value businesses like cloud, security, advanced solutions, services, including acquisitions,  and its digital capabilities. That strategy is similar to the one Apollo is taking with Tech Data.

The Partner Angle

What does all of this wheeling and dealing mean to channel partners?

Techaisle’s Anurag Agrawal

“I believe it will be business as usual for Ingram and partners,” said Anurag Agrawal, founder and chief global analyst, Techaisle. “The reason for divestiture from HNA was purely financial to strengthen HNA’s flailing balance sheet. There will likely not be any priorities or directions other than focus on cloud and customer. Distributors in mature markets have transitioned to support cloud, and the cloud marketplace will likely be a significant push.”

Channel partners like Alex Cooper, procurement coordinator at New England Network Solutions in Lowell, Massachusetts, said the sale of Ingram Micro won’t impact his firm much.

“We’ve been doing less business with them over the past couple of years,” he said.

Better service from Synnex is the reason for that.

“[Synnex is] easier to work with, less bureaucratic,” he said.

New England Network Solutions works with Ingram for some vendor product licensing. Synnex is its go-to distributor for licenses, but also servers, switches, access points and firewalls.

Meantime, another partner, Bill Ooms of Business Systems Solutions, an Indiana-based MSP, is hesitant to endorse acquisitions such as this.

“I am a little leery about acquisitions [by] venture/equity partners,” said Ooms. “It has seemed to turn our vendors into being focused on their profits, not on us as customers. Our costs have gone up a lot over the last one to two years, even with COVID-19. They claim more benefits, but usually it’s just a more aggressive marketing engine to get us to buy more from them.”

Diane Krakora, principal at PartnerPath is surprised to see Ingram Micro changing hands again.

PartnerPath’s Diane Krakora

“However, hopefully the private equity ownership will give Ingram Micro the time and resources to shift to a more cloud/SaaS forward value proposition,” she said.

Generally speaking, Krakora expects to see a lot of M&A activity during these unique times.

“Companies struggling with defining and communicating a strong value proposition before the pandemic hit are going to suffer as budgets tighten and spending is more scrutinized,” she added.

Next

With its big global footprint, Agrawal will watch to see if Ingram expands beyond the pick-pack-ship to cloud in emerging markets. Another challenge for Ingram Micro is competing marketplaces.

“One of most significant challenges to Ingram and its partners would be AWS and Azure marketplaces emerging as direct competitors. I believe Ingram should become active for small to midsize vendors,” he said.