Distribution Watch: Tech Data Scoops Up Avnet’s Technology Services Group

Written by Kris Blackmon
September 20, 2016

We’ve seen a lot of deal making among vendors this year as technology companies adopt different strategies to adapt to a rapidly changing enterprise IT landscape. And now we’re seeing this scenario play out in the distributor space.

Tech Data Corp. (TECD) announced its intentions to purchase Avnet Inc.’s (AVT) technology solutions business unit on Monday for $2.4 billion in cash plus shares valued at about $200 million. The transaction, which is set to close in the first half of 2017, will give Tech Data a rich presence in the Asia-Pacific market.

The technology solutions group focuses on complex data center technology, and the vendor and customer relationships that come with it. Bob Dutkowsky, CEO at Tech Data, today told The VAR Guy that the deal will give Tech Data a more robust value added distributor business to complement its traditional broadline distribution programs for less technical products.

Wall Street has given its tacitly understood blessing. Tech Data's shares were up nearly 5 percent at $72.80 in premarket trading on Monday, while Avnet's shares were up 8.4 percent at $42.50.

“The math works really well for the shareholder,” says Dutkowsky. “We’re adding together two profitable, well-run companies. We’re making one plus one equal three.” Combined, the two businesses will be a Fortune 80 company, he says.

In the long term, Dutkowsky says that the move will help Tech Data avoid the pitfalls of other narrowly-focused distributors that stay siloed in a particular part of the IT ecosystem. Today’s partners want one resource for all of the multiple vendor products they have to weave together to provide end-to-end solutions for their customers. If Tech Data can’t provide a wide array of products and services, Dutkowsky says, it won’t stay an attractive source for resellers.

“No product sits by itself in the IT ecosystem. Every product needs complementary services and products,” Dutkowsky says. “Take, for example, the smartphone. You can’t just sell the phone. You need carrier relationships. Smartphones need apps. And no one is going to use it if it isn’t secure, so you’ve got security needs there, too.”

Dutkowsky says the deal will position Tech Data to offer far more to partners in terms of a “one-stop shop” than other distributors. For example, Avnet has a technical training arm that trains partners to get certified on certain platforms. He envisions a program that will let Tech Data extend this education up and down the stack.

Vendors are starting to recognize the advantages that distributors bring better than ever before, according to Dutkowsky, but their true value isn’t as readily apparent. “It isn’t a mystery that distributors help vendors get products to market, but the least known characteristic of distributors today is the depth of deep skills around technical products and processes we bring.” He sees the ability to offer this comprehensive expertise and education as the true benefit to vendors, and says Tech Data’s phones are already ringing with companies wanting to leverage the assets this deal will bring.

“Tech Data is alive, well, healthy, vibrant and being bold in the marketplace,” he says. “A transaction like this shines the spotlight on the creative things we’re doing.”