August 25, 2020
In what could be a second acquisition of Ingram Micro in four years, Platinum Equity, a U.S. private equity firm, is in talks to acquire the distributor for $7 billion, according to Bloomberg. HNA Group, a Chinese aviation and shipping conglomerate, owns Ingram Micro.
Tianjin Tianhai Investment Co., a publicly traded subsidiary of HNA Group, acquired the distributor in 2016. The deal was worth about $6 billion.
There have been reports of financial difficulties at HNA Group.
In May, Mingtiandi reported that HNA Group failed to repay $750 million owed from its buyout of Ingram Micro. Apparently, HNA Technology missed repayment on a $4 billion loan secured from lender Agricultural Bank of China in 2016. That loan was to finance the group’s acquisition of the distribution giant.
Acquisition talks between Platinum Equity and HNA Group are ongoing.
M&A activity in the technology distribution sector has been plentiful. What about this latest potential acquisition of Ingram Micro?
“Under aggressive (and attentive) private equity ownership, Ingram will be provided the resources (and time) to transform the core of their business,” said Jay McBain, principal analyst, channels, partnerships and alliances at Forrester Research. “The majority of their line card is declining in the next 12 months due to COVID-19 and there is risk in the economic stability of their customer base. More pressing is their lack of visibility in the broader cloud and emerging tech ecosystem and threats with the growth of eCommerce and marketplaces.” McBain cites McKinsey and Forrester research – 10 years of growth in last 3 months.
Platinum Equity’s Tom Gores
Platinum Equity, founded by Tom Gores and with headquarters in Los Angeles, has been in business since 1995. The firm specializes in mergers, acquisitions and operations of companies that provide mission-critical products, services, and solutions in diverse industries.
To date, the M&A&O firm has completed more than 250 acquisitions, according to its website. In July, for example, Platinum Equity announced the acquisition of L&R Distributors based in Brooklyn, New York. L&R specializes in large SKU-count categories such as cosmetics, hair care products, stationary, office supplies and toys. It operates three distribution centers in the U.S.
Ingram Micro and Platinum didn’t respond to our requests for comment.
Things have been shaky for Ingram Micro for a couple of years since the acquisition by HNA Group. Back in December 2018, the Wall Street Journal reported that the Chinese conglomerate was set to sell Ingram Micro to private equity firm Apollo Global for $7.5 billion, including $1.5 billion in debt.
When that deal went by the wayside, talk about a new suitor for Ingram Micro popped up again. This time, last August, RRJ Capital was in advanced talks with HNA Group to lead a $4 billion investment in the distributor, as reported by Bloomberg.
Is the third time the charm?
“With millions of new tech services companies coming in from all directions, 175,000 software companies, and 800,000 emerging tech firms all competing for customer visibility, distribution (as a whole) will need to be more automated, adaptive, flexible, and anchored on AI-powered self-service. More than that, Ingram and other major distribution companies will need to come out from hiding behind their customers (partners) and start to educate end-user customers on their value, co-innovation possibilities, and network effect,” said McBain.
The ink is barely dry on Apollo Global Management’s $5.4 billion acquisition of Tech Data, which closed on June 30.
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