All Eyes On Potential Fallout From Apollo Globals $5.4B Tech Data Acquisition
By Steven Burke
13 November 2019
Apollo Global Managements $5.4 billion acquisition of distribution behemoth Tech Data has the channel focused on potential fallout from the deal
including potential pricing or services changes.
Martin Wolf, president of martinwolf M&A Advisors of Walnut Creek, Calif., one of the top channel
investment advisory deal-makers, told CRN he sees the Apollo acquisition improving pricing for Tech Data partners.
You hear the argument that
because they are going to have so much debt they will have to raise prices, said Wolf. I dont believe that. I think theyll eliminate things that partners dont want to pay for and theyll put that into price. I
think is absolutely going to improve Tech Datas pricing. This is a good deal for partners.
Wolf said he expects Apollo to come in with a
clean slate with a focus on calibrating the business to drive higher value. I think Tech Data is going to do fine under Apollo, he said. What it means is youll have lower prices, lower cost, and better service for
all the customers in this space. This is going to force everyone to step up.
Apollo is a proven and seasoned private equity powerhouse with deep
experience in the technology market, said Wolf.
One sign of Apollos success in the technology services market: the higher margins being delivered
by Presidio, No. 23 on the CRN SP500. Apollo acquired Presidio in 2014 and was rewarded with a healthy premium after London private firm BC Partners took it private earlier this year.
Presidio was owned by Apollo and their margins are now higher, said Wolf. Their customers pay more because they now offer better service.
Apollo has done a lot of deals. They have established bonafides. They have had a lot of success in the IT supply chain space.
Wolf credited former
Tech Data CEO Steve Raymund, who served as CEO for 20 years from 1986 to 2006, for building one of the premier distribution companies in the technology business.
Hats off to Steve Raymund who built this great company, said Wolf. They were always the number three distributor. Now they are either a
premier or the premier distributor. They started out with real disadvantages. Ingram and Merisel were behemoths in the early days not including Avnet and Arrow who were both large. Tech Data came out of no where.
Wolf said the likeliest bidders that could potentially offer a higher premium distributors Ingram Micro and Synnex are encumbered or have
Synnex is moving into higher value supply chain business and private equity is a logical acquirer of Ingram, said
Wolf. You have to have a lot of conviction to make a deal like this, he said. Apollo has that conviction.
Wolf said Tech Data got
a healthy 30 percent premium given Tech Data shares were trading at $80 on August 13 before what appeared to be a leak that a potential deal was in the offing. Its a full premium, he said.