Tuesday, May 22, 2018
Business

Trigaux: How Tech Data Corp. went all in to mastermind a deal to go global — and stay local

To say Tech Data Corp. CEO Bob Dutkowsky's having a good year isn't a far cry from suggesting the New England Patriots had a good Super Bowl.

Tech Data just closed on a major — better yet, let's call it game-changing — acquisition of the Technology Solutions group of Avnet, another big tech distributor. The deal was priced last fall at $2.6 billion, a figure that should not be taken lightly. That's the same price the stock market valued all of Tech Data — $2.6 billion — as a public company when the purchase was announced.

Fast-forward. This stock market now values Tech Data at closer to the richer price of $3.5 billion. And the company's stock price this past week has reached record territory, topping $95 a share briefly.

So Tech Data's acquisition amounts to something of a big bet. Think of it as going all-in in a poker game.

The deal, recently completed, will bump Tech Data's already hefty annual revenues to about $35 billion from the $27 billion or so the company now generates. It also establishes a beachhead for Tech Data in the Asia-Pacific region, a part of the globe Dutkowsky has long sought in his 10-plus years as Tech Data's chief executive officer.

The deal even reinjects Tech Data into Latin America. The tech distributor pulled much of its business out of that part of the world when it decided it could not make a profit. A Technology Solutions presence there renews the Latin America opportunity.

Bottom line: Tech Data just made a quantum leap in size, geographic reach and competitive strength.

In an interview, Dutkowsky to no one's surprise was in a jovial, joking mood. "Yeah," he deadpans, "we've just been sitting here eating bonbons all winter long."

Tech Data Corp. is well on its way to scrambling farther up the elite Fortune 100, a list made up of the top 100 public corporations in this country as measured by revenue. The addition of Technology Solutions, Dutkowsky points out, pushes Tech Data in revenue size ahead of such well-known and respected companies as American Express, McDonald's and (for now), yes, even Facebook. Left unsaid, to be fair to these landmark companies, is that they were far more profitable than Tech Data, which operates on ultra-thin margins.

Still, it's an impressive accomplishment for any company. For international technology product distributor Tech Data, already Tampa Bay's biggest company by revenue, the Avnet deal sends some important signals, says Dutkowsky — who will be inducted this spring into the Tampa Bay Business Hall of Fame.

First, the CEO stresses, as a Tampa Bay company Tech Data Corp. decided to be a buyer, not a seller. "When the biggest company in a community takes actions, it speaks to a commitment that Tampa Bay will be a vibrant, long-term business community," Dutkowsky says. Tech Data has had many opportunities to move elsewhere but has never done so. "We are doubling down, strengthening our commitment to this community," he says.

"I like to think of us as one of the anchor tenants of Tampa Bay."

That reinforcement is all the more compelling since many Tech Data employees initially assumed that Dutkowsky, who succeeded founding family member Steve Raymund as CEO, had been hired to sell the company.

Second, Dutkowsky says Tech Data's acquisition will vastly broaden the company's ability to deliver tech products to major businesses. Tech Data's big in such products as laptops, tablets and printers, while its new addition excels in storage, network servers and other data center products. Now companies like Cisco, with huge appetites for tech products, will find a much wider menu under one roof — Tech Data's — that will give the company new ways to cross-sell and deepen its relationships with major client companies.

"As the world rockets forward, the historical lines between data centers, desktops at home and the cloud are blurring," Dutkowsky says. The new Tech Data will be far better positioned to anticipate such changes.

The addition of an Asia-Pacific presence has been long in coming for Tech Data and hints of great promise. In May 2012, when I interviewed Dutkowsky about the future for his company, Asia was already top of mind.

"We look at Asia all the time," Dutkowsky told me then. To gain a foothold there, he explained, Tech Data would buy an existing distributor there.

That day just arrived. But the finalized deal for Avnet's Technology Solutions was a long time coming. Dutkowsky says the company needed to wait for the right deal and the right alignment. That ranged from Tech Data finally operating worldwide on a single IT system to finding the right business that complemented Tech Data's products, strengths and, most of all, its culture.

"This was a transformational move we really wanted to launch five or six years ago," the Tech Data chief says. It took time to find the right partner.

Now comes the hard part: integrating Tech Data, with 9,000 employees, and Technology Solutions, which adds 5,000. Dutkowsky acknowledges "we'll screw it up here and there" before it all works well.

"I have tremendous confidence in the management team here," Dutkowsky says. "And the board shares that confidence."

In November, a smiling Dutkowsky graced the cover of Florida Trend magazine, a sister publication to the Tampa Bay Times. Next to the Tech Data CEO is a somewhat startling, four-word quote: "Nobody knows we exist" — despite the fact that Tech Data's announced acquisition back then could very likely make it Florida's biggest company.

Tech Data will never become a household name, despite its selling more than $100 million of tech products to businesses on any given work day. But the deal with Avnet should go a long way to boosting the Tech Data brand in the global technology race, and across the Tampa Bay business community.

Contact Robert Trigaux at [email protected] Follow @venturetampabay.

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