The Cloud

Tech Data to Acquire Avnet Unit for $2.6 Billion

The deal is part of a "consolidation craze" sweeping tech distributors amid the migration of customers to the cloud.
Matthew HellerSeptember 19, 2016

Avnet said Monday it had agreed to sell its technology solutions unit to rival Tech Data for $2.6 billion, marking further consolidation in an industry that has been losing corporate business to cloud providers.

Both Tech Data and the Avnet unit it is acquiring sell tech gear to resellers who, in turn, sell it to end-user customers. The deal leaves Avnet to focus on selling electronic and mechanical components including chips, circuit boards, and enclosures to manufacturers.

“This transaction presents us with the best strategic path for Avnet’s future success and profitability, and puts Technology Solutions in position to achieve breakthrough business results with Tech Data,” Avnet CEO William Amelio said in a news release.

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Bob Dutkowsky, chief executive officer of Tech Data, said the deal “will position us as a premier global IT distributor with the most diverse end-to-end solutions from the data center to the living room.”

As Fortune reports, tech distributors have been going through a “consolidation craze” that includes the pending $6 billion acquisition of Ingram Micro by China’s HNA Group.

“Many corporate computing jobs are moving to public cloud providers like Amazon Web Services, Microsoft Azure, and Google Compute Cloud,” Fortune said. “As that happens, there is less need for these customers to add to their existing data centers or to update their hardware as they have in the past.”

Tech Data stocks everything from iPhones, iPads, and MacBook Pros to other PCs and laptops, and it also has a data center equipment business. Avnet’s technology services unit focuses more on higher-end data center hardware.

“If [our customers] can go to one place, it makes it easier for them and much more efficient for them to solve problems for their customers,” Dutkowsky told The Wall Street Journal.

In trading Monday, Avnet’s shares rose 6.8% to $41.89, while Tech Data jumped more than 22% to $84.80. “Moving forward, Avnet will focus its resources and investments on becoming a leader in design chain and supply chain services not only for our current customers and suppliers, but also for new markets,” Amelio said.