Ingram Micro-Platinum Equity Deal Is Sign Of Distribution ‘Renaissance’

‘With Ingram now owned by Platinum and Tech Data owned by Apollo there is going to be a renaissance in distribution,’ says Martin Wolf, president of martinwolf M&A Advisors. ‘It is good for the channel to have heavyweights (like Platinum and Apollo) between them and the vendors. It is very good news for partners.’

Ingram Micro’s $7.2 billion acquisition by seasoned private equity technology powerhouse Platinum Equity marks a reemergence of distribution that will bring big benefits to solution providers, said industry executives.

The deal -- which comes just six months after distributor Tech Data was acquired by Apollo Global Management Inc.-- brings a powerful one-two private-equity punch to the distribution market that will lead to creative new solution offerings for partners, said executives.

“With Ingram now owned by Platinum and Tech Data owned by Apollo there is going to be a renaissance in distribution,” said Martin Wolf, president of martinwolf M&A Advisors of Scottsdale, Arizona., one of the top channel investment advisory deal-makers. “It is good for the channel to have heavyweights (like Platinum and Apollo) between them and the vendors. It is very good news for partners.”

Ingram said the deal -- which ends four years of ownership by China based HNA Group -- will provide the $47 billion behemoth with “added flexibility and resources to accelerate growth and execute on strategic initiatives.”

Wolf said he expects Platinum Equity to “significantly improve” Ingram’s business. “Platinum has real size and real reach,” he said. “They have a very different perspective than being owned by a Chinese company.”

Wolf said he expects both Platinum and Apollo to drive new value for solution provider heavyweights like CDW, Insight and Computacenter. “These companies will be helped by having these (private equity) behemoths fighting on their behalf,” he said. “It’s very favorable for the channel. Tech Data’s acquisition by Apollo changed the profile of the company completely.”

Both Platinum and Apollo are private companies that can take a longer term view of the distribution market, said Wolf. “These companies are deep-pocketed and have a track record of success,” he said. “They are going to do things that create value for their shareholders. That creates unique opportunities for various channel partners. The more creative channel partners will profit.”

Wolf said he expects more “bespoke” offerings available to the channel that will benefit partners. “The big opportunity here is that Ingram and Tech Data are now private companies with big, sophisticated owners,” he said. “Those owners are going to slow down things that aren’t good for the channel and accelerate things that are good for the channel because they have real size and real reach.”

One sign of the distribution renaissance, said Wolf, is the fact that the driving force behind the Ingram Micro deal was “rock star” Platinum Equity partner Jacob Kotzubei.

“Jacob Kotzubei -- the lead on this deal -- has probably created more value than any non-founder in the last 20 years in the channel,” said Wolf. “When you look up rock star in the dictionary you see his photo. He follows through on his commitments and makes things happen.”

Among the deals that Kotzubei has driven in the channel include Data Blue, Compucom Systems, Pomeroy, and Canvas Systems -- which was represented in the Platinum Equity deal by martinwolf M&A Advisors.

Frank Vitagliano, the chairman of of the Global Technology Distribution Council GTDC, the industry association representing distributors worldwide that now make up $150 billion in annual sales, said the private equity investments in distribution is “absolutely an indicator that the investment community understands the value” distributors bring to the global IT supply chain.

“The private equity investments being made show how important distributors are in the overall technology ecosystem,” he said. “It’s an indicator of how big a role distributors are currently playing and will continue to play in bringing digital transformation to businesses of all sizes.”

Bob Venero, CEO of Holbrook, N.Y.-based solution provider Future Tech, No. 96 on the CRN 2020 SP500, said he also sees the Platinum Equity investment as a big win for partners.

Venero said he is hoping Platinum will once and for all provide a single global footprint that recognizes the full global revenue of partners like Future Tech – which now operates in 70 countries- rather than just accounting for regional revenue when Future Tech makes large purchases.

Currently distributors recognize only the revenue within certain global regions to be accounted for on purchases, said Venero.

“If Platinum wants to take share from other distributors, having a better international model is key,” he said. “We need a distributor who understands the global aspect of working with a partner versus a narrow regional perspective. Distributors need to recognize global spend of a partner versus just regional revenue. One of the challenges we have faced as a global VAR is that distributors in each country look at us from a regional perspective. That is a big problem.”

Now that Ingram will not owned by a Chinese company, it has the opportunity to also increase share in the U.S. market to solution providers selling to federal government customers, said Venero. He said when Ingram was acquired by HNA Group four years ago he pulled a minimum of $20 million in revenue from Ingram.

“We did not want to put our government customers at potential risk because of the Chinese ownership,” he said. “Now that Ingram is being acquired by Platinum. There is a very good potential that we will shift some of that business back to them assuming Platinum Equity does not try to drive higher margins by immediately raising prices to VARs for a quick return on their investment.”

Venero urged Platinum to aggressively communicate the growth potential for Ingram and the benefit for solution provider partners. “Platinum should come out from behind the curtain and communicate to the channel community that they are here not to just turn and burn, but to help grow the business profitably with a benefit to the VARs as it relates to that growth,” he said. “If they want to gain share in the intensely competitive distribution market that’s what they need to do.”