Thursday, January 18, 2018
Business

Trigaux: Tech Data makes bold acquisition move while other Tampa Bay firms opt to sell out

After watching too many major Tampa Bay corporations sell out to other businesses in recent years, it's a pleasure to see a few of the bigger companies still here pursue serious acquisitions of their own.

Case in point: Tech Data Corp. The IT products distributor this week said it will pay $2.6 billion to buy Technology Solutions, a unit of Phoenix-based Avnet. The deal, Tech Data's largest, will boost the Clearwater company's annual revenues to $35 billion from $26 billion, bump its employees to more than 14,000 from 9,000 and push the business into 35 countries (including into Asia for the first time) from today's 21 countries.

"We want to be nimble," Tech Data CEO Bob Dutkowsky says.

Initial reviews are thumbs up. Shares of Tech Data — this metro area's largest public company by revenues — soared a whopping 22 percent on Monday. It rose slightly on Tuesday, closing at $85.08 — an all-time high. Multiple firms, from BankofAmerica/Merrill Lynch to Stifel, raised their ratings this week from neutral to buy.

The company is "all of a sudden a worldwide powerhouse in information technology," CNBC stock commentator Jim Cramer gushed on Monday. "I'm kind of amazed. What a deal."

I'm kind of amazed, too.

Previous coverage: Clearwater's Tech Data to buy technology firm for $2.6 billion

Too few Tampa Bay corporations seem to have the gumption or muscle to pursue big deals. Most seem more adept at selling out to other, distant firms. Consider:

•Tampa's TECO Energy, parent of Tampa Electric and Peoples Gas? Sold off this year to Canada's Emera Inc.

•C1 Bank, St. Petersburg's innovative community bank? Sold to Bank of the Ozarks this summer.

•Lincare, Clearwater's giant distributor of healthcare oxygen? Bought by Linde AG of Germany.

•Danka Business Systems? Global Imaging Systems? Florida Progress? All notable area companies of the past that were absorbed by others.

So let's applaud Tech Data's leadership for its self confidence and belief it can remain a major competitor as it spans a larger piece of the globe. Especially in Asia, where Tech Data's long wanted to enter.

Dutkowsky, who once worked for IBM in Japan, once told me Tech Data "looks at Asia all the time." He said that in 2012. Now he's getting his wish. Still, the Avnet deal will yield only a tiny Asian foothold for starters. It will represent 3 percent of Tech Data's overall business.

No deal of such magnitude is without risk. Tech Data is spending $300 million of cash and taking on $2.1 billion of new debt to buy the Avnet unit.

Industry experts point to the rapid consolidation now under way in Tech Data's industry. They cite the deal made earlier his year by Ingram Micro, Tech Data's chief competitor, to be acquired by China's HNA Group for $6 billion.

Tech Data's expansion by acquisition puts the IT company in the same camp as St. Petersburg's Raymond James Financial. The investment firm dared to buy a Memphis-based brokerage called Morgan Keegan in 2012 for $930 million. Since then Raymond James has grown even more, adding financial advisors from Wall Street firms — especially in wealthy corridors in the Northeast and California.

That growth strategy has rewarded Raymond James with a market value topping $8 billion, a huge increase from its days before the Morgan Keegan deal.

Tech Data's market value, about $3 billion, has changed little in years. With Monday's deal, my bet is that value will begin to rise.

Taking a smart risk can have its rewards. That's how the game is played. Nice to see a bit more of it in action in this metro market.

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

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