Done Deal: 5 Things To Know About The New TD Synnex
As of Sept. 1, Synnex and Tech Data have merged to form the world’s largest IT distributor as the rebranded TD Synnex, surpassing 30-plus-year market leader Ingram Micro by revenue. Here are some keys to understanding the importance of this merger to solution providers and investors alike.
Understanding The New TD Synnex
Synnex and Tech Data Wednesday completed their merger and the new TD Synnex is now the largest IT distributor with combined revenue of $59.8 billion. That merger means the two combined take over the No. 1 position that has been held by rival Ingram Micro for over three decades.
The $7.2 billion merger of publicly traded Synnex, Fremont, Calif., and private-equity-owned Tech Data, Clearwater, Fla., which was first unveiled on March 22, marks a new era in the bitterly contested distribution battle for the hearts, minds and pocketbooks of solution providers, setting the stage for an epic face-off between TD Synnex and Ingram Micro.
“We are looking forward to seeing what the new Tech Data-Synnex can bring to us,” said Michael Hadley, CEO of iCorps, Technologies, Woburn, Mass., whose primary distributor is Ingram Micro. “The key for us will be access to inventory, pricing and communications. The ability to have a strong account manager who can get on the phone is important too. It’s a partnership.”
If TD Synnex gets it right, the deal could lead to a seismic shift in the distribution landscape, Hadley told CRN.
“To me it is a big change if it really helps out MSPs with pricing, inventory and strong support,” he said. “It doesn’t mean anything if it doesn’t do that. They are going to have to make it a better experience for me and the channel in order for me to move business to them.”
Here are five things key to understanding the new distribution leader.
A Major Change At The IT Distribution Top
With the merger of Synnex and Tech Data, the IT distribution business has a new leader, at least in terms of size. The combined company has 150,000 customers, 1,500 vendors on its line card and 22,000 employees. Synnex shareholders own 55 percent of the combined company, while private equity company Apollo Global Management—which in June 2020 acquired Tech Data for $5.4 billion—owns 45 percent.
TD Synnex is a worldwide superpower, bringing an expanded global distribution network and extensive OEM relationships to channel partners looking to not only procure the latest hardware, software and services, but also complete offerings for on-premises, public cloud and hybrid cloud deployments.
The new distributor is also expected to have the size to scale investments in developing new solutions and more financing for channel partners looking to bring the latest cloud, next-generation data center, security, Internet of Things, intelligent edge and 5G technologies to customers.
For example, Tech Data had already been investing heavily in its StreamOne cloud platform, while Synnex had been making a big bet on its Stellr platform. Now the two companies can eliminate duplicate efforts, freeing up cash to “accelerate” next-generation technologies moving forward, Rich Hume, now CEO of TD Synnex, told CRN earlier this year.
“Cloud platforms are extremely critical to the future. By us combining, we’ll be able to bring expanded investment into those next-generation technology areas,” he said.
Tech Data’s StreamOne bet came as the distributor was investing $750 million in next-generation technology areas such as cloud, security, analytics, IoT and artificial intelligence.
Leading TD Synnex are two longtime distribution executives, both of whom have reached the tops of their organizations.
Rich Hume (pictured), who served as CEO of Tech Data since 2018, is the CEO of TD Synnex. Hume joined Tech Data as chief operating officer in 2016 and took the lead in integrating Avnet’s Technology Solutions business into Tech Data after that 2017 acquisition. Prior to that, he spent over 30 years at IBM.
Dennis Polk, executive chair of TD Synnex’s board of directors, served as Synnex’s president and CEO since 2018 after serving 16 years as the distributor’s COO, CFO and senior vice president of corporate finance.
The new TD Synnex board of directors includes six members appointed by Synnex, four members appointed by Tech Data owner Apollo Global Management, and Hume.
Synnex, for the 12-month period ended May 31, 2020, generated revenue of $22.2 billion, gross profit of $1.3 billion, EBITDA of $720 million and adjusted margin of 3.2 percent. For Tech Data’s 12-month period ended April 30, 2021, revenue was $37.6 billion, gross profit was $2.2 billion, adjusted EBITDA was $887 million and margin was 2.4 percent.
Combined, the TD Synnex organization would have shown total revenue of $59.8 billion, gross profit of $3.5 billion, adjusted EBITDA of $1.6 billion and margin of 2.7 percent.
The two companies expect to see estimated net annual cost synergies of $100 million after the merger.
Dual Integration Businesses
Synnex and Tech Data have large overlapping integration businesses for helping channel partners build integrated solutions before shipping to customer sites.
Synnex SERVICESolv helps maintain data center and on-premises solutions and provide custom solutions with OEM enterprise integration and customization, engineering and branding, and post-sales support.
Meanwhile, Tech Data Global Lifecycle Management provides R&D, sales and marketing, and partnership capabilities to help solution providers better meet customer requirements.
Synnex also brings Hyve, a 10-year-old organization providing a unique integration service aimed primarily at hyperscale cloud services providers.
Dual Peer-To-Peer Partner Communities
Synnex and Tech Data also bring peer-to-peer communities of solution providers.
Synnex has the Varnex community of SMB and midsize solution providers who not only collaborate on purchasing products, but who network with each other on ways to improve their business and to jointly develop solutions for customers that require more capabilities than one partner could provide. Synnex in 2020 revamped Varnex to better support the company’s “Solv” methodologies for building industry-specific solutions. Varnex provides exclusive credit programs, two national and six regional conferences, exclusive vendor promotions and discount FedEx and other shipping programs, and exclusive training including its Varnex University.
Tech Data has TechSelect, a community of solution providers that share industry insight and have the chance to work on joint customers. According to Tech Data, TechSelect, which has been around since 1999, has about 400 members generating about $3.5 billion in annual revenue for the distributor. Tech Select brings partners yearly market development funds to help drive business. And, like Varnex, TechSelect offers discounted or free shipping, exclusive promotions and extended payment terms, and ongoing training.