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Fresh chapters for both Tech Data and Avnet

Following the announcement of the $2.6bn acquisition of Avnet Technology Solutions the CEO's of both Tech Data and Avnet took to the web to discuss the deal

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Following the announcement of the Tech Data deal to purchase Avnet Technology Solutions the management from both firms took to the web to share more details over the move.

The announcement that Tech Data was buying ATS in a cash and share deal worth $2.6bn will create a distributor operating in 35 countries with revenues in excess of $35bn.

For Tech Data this is the start of a new chapter as a global player that is now covering more of the planet, going up from 21 countries to the 35 the combined enterprise will reach.

For Avnet this is also the start of something fresh and a return to the electronics components business it has been associated with for years.


Tech Data

Bob Dutkowsky, chief executive officer of Tech Data, said that the deal would create a truly global distributor that served customers from the board room to the living room.

He said that it would help channel partners accelerate their growth through next generation technologies, which it felt it would now be in a better position to capture.

He added that although it was taking on some debt, around $21.bn, to finance the transaction the financial benefits were going to be positive and it had already identified significant cash savings that would be realised within two years after closing the deal.

Dutkowsky said that ATS operated in areas it had identified were strategically important for growth and it had a very solid business.

"We were attracted to ATS because we believe its strength will allow us to better capitalise on the IT disruption that is underway," he said.

There were also vendors that asked "every day" if Tech Data would go to Asia Pacific, which has previously been answered in the negative but could now be given a thumbs up.

He also revealed that the Tech Data board came to the conclusion that it needed to extend its reach to make sure it could cover all the bases of home, office, data centre and cloud. Although it has its own broadline and data centre business the decision to buy because the industry was moving much faster than the time it would have taken to have built the ATS equivalent operations organically.

The deal also took over a year to come to fruition with Tech Data taking the ideal to Avnet after it had concluded that it needed to expand and ATS would be the best fit.

He added that the world of technology was changing and there was a blurring of the lines as users took IT between home and work, "This convergence calls for a distributor that can operate from end to end".

"No other distributor will be positioned to provide true end to end solutions from the data centre to the living room," he concluded.


Avnet

Avnet is returning to its electronic components distribution roots following the sale of its Technology Solutions business to Tech Data.

The firm is still keeping a foothold in the technology world with its embedded solutions business and it plans to position itself as a player in the IoT market.

The firm will now become a specialist in design chain and supply chain services targeting the growth markets of web enablement, embedded solutions and the internet of things.

All of these markets represent areas we will grow and invest," said William Amelio, CEO of Avnet.

"When we evaluated this transaction...we have concluded this transaction is in the best interests of our employees, customers and partners," he said.

Amelio said that as the cloud expanded and the need for a wider solution became a necessity it made sense to sell off the technology business to Tech Data, which would now be in a position to meet that challenge.

He added that with the funding from the sale it would invest in growth areas and its own systems to make sure it was able to serve its customers better. There was also a strong hint that some of the money could fund future acquisitions.

There are also expectations that a relationship will continue with Tech Data as the two firms will be both working in the IoT area and could well complement each others efforts in that area.

After the ATS sale Avnet will be a $17bn company. Operating income margins are expected to improve quite substantially. The deal is expected to close in the first half of 2017.

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