Industry reacts to Avnet TS/Tech Data merger

The news that Tech Data is to acquire Avnet's Technology Solutions business for £2.6bn has left the industry reeling…..

As the magnitude of the mega merger between Tech Data and Avnet's Technology Solutions business begins to sink in, CRN has gathered some early doors reactions from the industry.

Alex Tatham (pictured right), managing director of Westcoast was surprised by the news, but said it paints the channel as the place to be for acquisition action.

"It is going to be fascinating to see what happens - consolidation is rife and it feels like the channel is an excellent place to do deals.

"Congratulations have to go to Tech Data, they have bought an excellent company and I hope everything goes well."

He said firms the size of Tech Data were just not growing fast enough organically, and to grow they have to acquire.

"Of course this is also great news for Westcoast as well," he added.

Ian Kilpatrick (pictured left), chairman of Wick Hill Group agreed it was the way global giants worked.

"As a concept it is not a shock. If a business model is built on inexorable growth, part of that is based around continuous acquisition and these companies need to get bigger and bigger. Consolidation typically tends to be at the volume end where there are huge margin pressures."

"Tech Data covers everything, but if you look at the value-add sector there is a continual pool of distributors coming in and delivering solutions, perhaps not on the same level as Avnet, but they are still delivering solutions."

Alastair Edwards, chief analyst at Canalys, said the move will give Tech Data the global coverage it has been looking for.

"It is massive news for the distribution industry and massive news for Tech Data as it brings a significant boost to their enterprise reach and their global coverage," he said.

"Interestingly, Tech Data in the last few years has been withdrawing from the more challenging emerging markets - Latin America and the Middle East - and they never had a presence in APAC. With this acquisition it gains a footprint in all three of those areas. Now it is a global distributor in the truest sense, rather than being a US and European distie with the majority of its business from western Europe.

He added: "I think it reflects direction that the whole industry is moving in. These trends aren't new, but in the face of the pressure on core volume products, the scale is essential.

"It's about Tech Data bolstering its ability to offer solutions and services to the channel. Look at the direction all of the vendors are moving in - HPE, Cisco, Dell EMC, many of the other higher end value vendors - what they want is a solution is a channel capable of delivering solutions. Avnet has developed a strong capability around that and has been very successful in certain markets, specifically the UK where that ability is going to allow them to carve out a niche… to generate high-value business with some of the vendors.

Now Tech Data is a global distributor in the truest sense, rather than being a US and European distie with the majority of its business from western Europe."

"In terms of enterprise business, in EMEA alone, there really are very few big enterprise solutions disties left who have the scale an Avnet or an Azlan has. Ingram have been trying to develop that but they have been behind the curve on that. It has bought operations in eastern Europe and the Middle East which has given it that focus, but in western Europe, a lot of the business has been volume oriented. Arrow has capability, and it's doing well in software and security, but it is specialising in those areas. I think that left Tech Data and Avnet as the two major disties who are able to deliver true, deep enterprise solutions capability in the datacentre."

He said the move also meant a positive for the smaller distribution players: "It leaves space for some of the smaller specialists. Look at people like Exclusive Networks, they're trying to create something pan-European but specialised and very much services focused. It will give them an opportunity to carve out a niche. The vendors will now be more and more dependent on a combined Tech Data and Avnet, which is not always a good thing. It creates some challenges with the power Tech Data now has. It will have lots of implications."

Carl West (pictured left), supply chain director, consumer choices at analyst firm GfK, said the move made sense for Tech Data.

"While my initial view was shock, once you consider the move it is clear that Tech Data is looking to bolt on services rather than re-invent the wheel.

"During the coming days more details will be revealed but the move strengthens Tech Data's position as a one-stop shop for all hardware and services.

"This move will enable their resellers to broaden their product portfolio and attract new client business, both adding revenue and increasing profits. GfK's recent 20:20 study highlights that distribution will go big or go niche. The middle ground has troubles ahead."

Context analyst Jeremy Davies (pictured right), said it shows just how fast the pace of change is in distribution.

"I didn't see that one coming - it is absolutely a mind-blogging development really. It just shows it is a tough business - it always has been. Looking at the numbers over the last couple of quarters, it probably - up to a point - makes sense.

"It was totally unexpected and just shows how rapidly the landscape can change in this business."

Barrie Desmond, chief operating officer at Exclusive Networks, said the news was a surprise, but not a shock.

"I think Avnet has been looking to divest from this side of the business for a while," he said. "Again we are seeing the mega global disties looking to lower the cost of go to market and move more efficiencies and effectiveness into the marketplace.

"I think it is better news for Tech Data as it takes them into the higher value business area and also into countries that they haven't been present before.

"For us our portfolio is very different and it underpins the fact that we are a value-based business and our resellers will genuinely see that. I think smaller niche distributors could be set to benefit from this in the future."