European Distributors React to Synnex-Tech Data Merger
Distributors we spoke with say the deal "demonstrates the value of distribution." The impact remains to be seen.
Distributors in Europe are reacting positively to the news of Tech Data merging with Synnex.
Announced Monday, the $7.2 billion merger will create a combined company with $57 billion in estimated pro forma annual revenues. It will serve customers in more than 100 countries worldwide.
European distributors say they recognise the importance of the deal, and that it highlights the value of distribution. However, they question how much the merger will impact EMEA. Tech Data is the much stronger player in the region, whereas Synnex has little presence comparatively. Conversely, Synnex is big in Japan.
“We are similar in a lot of ways without a lot of overlap,” Bob Stegner, SVP of marketing, North America, at Synnex, said yesterday.
Important Move
Alex Tatham, managing director, West Coast, said the merger was “an important move that spectacularly demonstrates the value of distribution.”
But, he added: “Synnex is very much the nimble player in the U.S., but there will be little impact on Tech Data in Europe. It’s unlikely to help speed up Tech Data’s business with a little more internalising and cost reductions. It makes lots of sense for both companies, though — it’s a great deal.”
Westcon Comstor’s David Grant
David Grant, CEO, Westcon-Comstor agreed. Westcon’s owner, Datatec, closed the sale of its Americas business to Synnex for $800 million nearly four years ago. As part of the deal, Synnex also acquired a 10% stake in Westcon’s EMEA and APAC business.
“The deal represents a significant further wave of interest from private equity investing in the distribution sector,” said Grant.
“Our own performance in fiscal year 2021 in the face of disruptions demonstrates that distributors still have a very significant role to play in creating and realising value in the IT ecosystem,” he added. “This is recognised by the investment community as a strategic opportunity for strong potential returns while reinforcing the need for innovative, value-creating distributors like Westcon International to offer choice, flexibility and focus to the channel.
“As far as the specifics of the deal are concerned, once it’s completed, the focus of the new merged business will be the Americas, meaning it’s of little consequence to our continued growth and success in our target markets.”
On Synnex’s stake in Westcon International, Grant said it was specifically designed to be no more than 10%. This was “to allow them to account for it as an investment and not as a shareholder of influence.
“They have no rights associated to this shareholding, and in fact in our most recent capital raise last year, Synnex diluted it to 8%. Their investment position affords them no control or influence on our business,” he noted.
Elsewhere, Michael O’Hara, managing director, DataSolutions, says the merger is affirmation of the critical role that distributors play in the channel.
“The merger is a real public affirmation that distributors do play, and will continue to play, a key role in the supply chain of IT technologies — from vendors through to reseller partners and down to end user corporates.