Avnet, Access CEOs: Nothing Will Change
"The Access organization essentially stays intact. The people they do business with, the service they get from Access does not change fundamentally," said Roy Vallee, chairman and CEO of Phoenix-based Avnet. "But now they are part of a company dedicated to technology distribution. The availability of complementary products and services is only an upside."
Under the deal, Avnet agreed buy Access, a $2 billion Sun Microsystems-focused distributor based in Westminster, Colo., for $415.5 million in cash from General Electric. The acquisition is expected to be wrapped up by the end of this year.
The combined companies will look to share best practices, which should benefit both Avnet and Access solution providers, Vallee said.
"While GE is a phenomenal company, it is not dedicated to the technology distribution business like Avnet is. I would imagine that Avnet is doing some things, perhaps our Channel Connection [initiative], that may be embraced by Access. And vice versa, we expect to learn things from them," Vallee said.
Besides furnishing Avnet with the Sun lineup, the acquisition brings new vendors such as Avaya, Hitachi Data Systems, Check Point Software Technologies and F5 Networks.
"If you are a Sun VAR and interested in Network Appliance and EMC, Avnet brings you that. If you're an IBM VAR and you want Avaya voice-over-IP solutions, you now have that," Vallee said. "The amount of upside will vary from VAR to VAR, depending on what they're trying to achieve in their business."
Most important, the deal brings Sun enterprise-class servers to Avnet, Vallee noted. The distributor carries IBM and Hewlett-Packard platforms and had picked up a limited Sun line when Sun acquired StorageTek.
"This puts the third leg on the stool. There are only three [enterprise computing] vendors that matter. We now have all three. The strategy is a perfect fit," Vallee said.
Access Distribution has been the subject of sale rumors almost as soon as it was purchased by GE as part of a larger deal in the mid-1990s. The distributor, formerly known as Access Graphics and then GE Access, has been linked to just about every IT distributor because its business differed from other GE units.
"We're part of [GE] Capital Solutions, an asset-based financing organization. Their strategy is around being a strong competitor in that market worldwide. We, as an IT distributor worldwide, didn't become a strategic component of that. This process was viewed as the best growth opportunity for Access," said Anna McDermott, CEO of Access Distribution.
It wasn't until a few months ago that Avnet was contacted by a banker retained by GE to manage the sale, Vallee said. "Over all the [years of speculation], there was no dialogue going on with GE. You can't buy a company until it's up for sale. GE decided for whatever reason that this is the right time. We're thrilled. It's a strategic fit for us," Vallee said. When the deal closes, Access for the first time will become part of a parent company focused on IT distribution.
"It will only enhance our value proposition to the market to be part of a parent that walks and talks the same language we do. The message to partners is it's going to get better," McDermott said. "I'm hugely excited by the opportunity. It's a great fit for Access, in terms of technology and geographic markets. It's a perfect dovetail, and I couldn't be happier. Their culture is very similar to Access, how they view and value their employees and how they view and value their customers."
Some solution providers have speculated that recent changes to Sun's channel program may have influenced GE's decision to sell Access now, but that's not the case, McDermott said.
"Sun's changes have been great for us. Our business under those channel programs has been strong. Those programs were needed to produce the results that Sun needed, and it's ultimately been positive for us and will continue to be so," she said.
Avnet had no immediate announcements about the future of Access Distribution's management team.
"I'm not aware of anyone leaving immediately. It's difficult for me to know today who is going to stay long term or not. It would be our desire for Anna to stay for an indefinite period of time," Vallee said.
McDermott also doesn't expect Avnet to force changes to Access's operations.
"Avnet is very excited about the value of the people that Access brings. It's the talent that has produced great results the last few years. That key talent is the differentiator for Access. I think Avnet will be aggressive to retain that. That includes myself," McDermott said.
Some layoffs are expected to occur as a result of the merger, but they're expected to primarily involve back-office positions that don't touch solution providers and are redundant with Avnet, Vallee said. Access will be run as a separate business unit, but preliminary analysis indicates that it can save $15 million in annual costs, he added.
The acquisition of Access is "by far the biggest" that Avnet has had in its computer systems business, Vallee said. Last year, the distributor purchased components distributor Memec, a $2.3 billion business, for just under $700 million.
Access adds about $2 billion in annual sales and should increase revenue for Avnet's Technology Solutions group to about $7 billion, Vallee said.
"As you might imagine, it's a GE company being run very well. If I compare this to other acquisitions we've done, the opportunity for productivity and efficiency gains are significant," he said.
With the Access deal, Avnet also expands its European market to four countries where it had no presence: Spain, Portugal, France and the Netherlands.