Ingram Leaders: HNA Deal Will Make Us More Financially Flexible With Partners

How will Chinese ownership affect Ingram's ability to play with the U.S. government?

Becoming part of private conglomerate HNA Group will allow leading global distributor Ingram Micro to offer more flexible financial terms to and bolster long-term support and investment in solution providers.

Paul Bay (pictured), chief executive of Ingram Micro U.S. and Export, and Damon Wright, executive director of investor relations, spoke with CRN about how Chinese ownership will affect Ingram Micro's U.S. government business, how the Irvine, Calif.-based distributor can leverage HNA's logistics capabilities to benefit partners, and how the company plans to stop competitors from poaching partners.

Ingram Micro shocked the IT world last week when it announced it was being acquired by Tianjin Tianhai for $6 billion and being folded into the $29 billion, Haikou, China-based HNA Group.

Read on for the inside scoop on this deal.

Should partners worry they'll receive less favorable financial terms once Ingram is part of HNA?

Wright: Absolutely not. If anything, now that we're no longer under the auspices of a U.S. publicly-traded company, we've got more flexibility to help our partners and customers meet their business objectives. If anything, I would think these guys [our partners] would think it would cut the other way. That sounds more like a comment out of one of our competitors.

Bay: We have the ability, and they're going to help support and invest with a longer-term outlook.

Will partners continue to receive the same credit terms, pricing and services post-closing?

Bay: Yes. It's a change of equity in ownership, and we're going to continue to look at how we can support and invest with a long-term outlook.

What impact will Chinese ownership have on your government business?

Bay: We've gotten both inside and outside legal guidance and counsel, and we've been told that there should be no challenges with the business we have today.

Should federal clients worry about the Chinese government monitoring their IT?

Bay: We're still operating as a U.S. entity in a U.S. business, so we have to abide by U.S. policies and regulations, which we will. Our systems aren't changing, nor is our compliance team.

Wright: HNA is a not a government-owned company. It's a privately operated company. If you look at some of their operations, they are potentially even more sensitive – Swissport, which runs airport cargo and handling at a number of airports throughout the U.S. … Talk about potential sensitivity in terms of who's putting cargo in planes. There haven't been any issues there. That received clearance, and closed a couple of weeks ago.

Do you expect blowback from your federal clients around security concerns?

Bay: The one thing is it's a change of equity in ownership. The systems aren't going to change (what) we're using today. Our compliance that we have today is staying in place. We have the same security practices that we have today in place, and the same policies and procedures.

How will you address supplier concerns around your role in pre-configuration and integration?

Bay: Again, our systems aren't changing. So our practices aren't changing on how we handle product, and our policies and procedures.

Wright: And it's the same employees as well that will be doing the same types of services they've done in the past. You don't suddenly have a bunch of different employees that are engaged in these activities.

What outreach is taking place to reassure partners about the deal?

Bay: I have been on Trust X Alliance advisory calls starting early (Thursday) morning (Feb. 18). I've been on an SMB advisory call yesterday morning. I've sent a personal letter out to hundreds and hundreds of customers. I've personally been on the phone since this announcement happened on Wednesday afternoon with dozens of calls, both from the vendor community, from the CEO on down, all the way through to our solution providers.

What about across Ingram Micro as a whole?

Wright: We sent a message broadly in terms of letters from the requisite contacts within Ingram Micro to both all vendor and customer partners on a global basis. And then it has cascaded down all the way from the top, where (CEO) Alain Monie has been calling his peers at the top distributors, the top customers that we work with. Paul, then, at the next layer, and throughout the organization, that contact is taking place. It's up to us to prove in those relationships that we've built – those trusted relationships – that nothing changes. We're still the best partner to help them meet their business objectives. Nothing changes in that regard. There's a reason we're the biggest, and that doesn't change.

How can Ingram leverage HNA's logistics capabilities to benefit partners?

Bay: There are opportunities from a supply chain standpoint of how we fit into the HNA portfolio, and how we can look at how goods are moved around this ever-increasing globalization that's going on. There's opportunity, especially outside from a North America perspective, for us to be able to look at that and the whole supply chain. You've seen where we've made investments – we'll continue to make investments as a company, both geographically and in other areas to continue to support our business. And we have their commitment that they'll continue to invest as we build out and maintain the current strategies that we've outlined.

What opportunities does this deal create for your North American partner base?

Bay: We get more and more requests from U.S.-based companies trying to serve on a global basis, and we have an organization, as you know, within my group that continues to focus on how we can do that. It's on the roadmap, it will continue to be on the roadmap, in how we can better service that and accelerate those opportunities.

Wright: With HNA and some of their geographic reach, we get even better penetration into emerging markets, which have exponential revenue growth and profit opportunities that some of our partners should be able to leverage.

What kind of autonomy will Ingram Micro have after this deal closes?

Wright: This company, their MO [modus operandi] is buy high-quality, well-known, well-branded assets that have great management teams and a good business model, and let them run.

Bay: They understand that for 35-plus years, our relationships have been key to the success of this business. There's no intention to change those relationships that we have today. We know this is a business where our relationships with our customers and vendors have been first and foremost, and that's going to continue to remain the same.

How will you prevent competitors from poaching partners during the transition?

Bay: Not much is changing. It's equity ownership, so our systems will remain the same. We're going to continue with our strategies, our goals and our objectives that I've outlined with you … When we go to our partners, it's about how do we shorten their sales cycle. How are we helping our solution providers understand how we can help shorten their sales cycle out to the end users? And then we're still going to be focusing internally, which is about working together better on our associate engagement, and how we can help show up every day differently … It's not going to change from the objectives we've had over a multi-year period.

How is this deal expected to affect partners?

Bay: We expect things to stay the same. The headquarters is staying in Irvine, Alain (pictured) is remaining CEO, I'm remaining and leading the U.S. and Export business. Our brand, our strategy, our values remained unchanged. If you look at the HNA Group, it's very similar from a value perspective, and the expectation and opportunity is to continue to move forward. Integrity, performance, innovation, words you've heard me use about our business. They have an emphasis and a history of empowering management. They use the words that we use. You're heard me talk about being an indispensable business partner to our customers and our vendors, and they're very focused on customer experience also.