Avnet chief speaks out over Bell acquisition

Roy Vallee ponders the future of the Bell Micro brand and talks integration

Roy Vallee: The Bell name will 'probably' be integrated into Avnet

Avnet chief executive Roy Vallee has brushed off industry concerns about the integration of Bell and has revealed that the UK business was a major reason for the acquisition.

Vallee said he had known Bell chief executive Don Bell since the 1970s, and has been conversing with him for the past decade about an acquisition, which finally became reality yesterday after the firm was acquired for $594m (£394m) including debt.

“Once Bell got its financials stated and became relisted – for me the opportunity became much more obvious, and that was when we escalated the dialogue,” Vallee said.

He also refuted claims that Avnet had paid too much for Bell.

“On price, we understand that there are many different ways to value transactions and for the past nine-plus years, we have been focused on a concept called value-based management – return on capital for value being the most important metric,” he said. “There is so little interest coming in on cash and the issue is, in the long term, will the combination of the companies produce return on capital? The answer is yes. One of the most prized assets of Bell is the UK business – we love its datacentre business and embedded system business.”

Vallee said software is an important part of the future for Avnet and it will be keeping Bell’s volume software business.

“We have a pretty significant software practice to date. We concentrate on the value-added solution and are not as focused on the fulfilment/commodity type devices. From our perspective in round numbers, Bell is 60 per cent value added and 40 per cent traditional distribution,” he said.

He added that the integration of two large companies is something Avnet is used to.

“We have done integrations of that size before – for example when we acquired Memec we had interests in every region of the world,” he said. “We have a process that we developed starting back in the early 1990s. We document the process fully. We will create integration project teams and embrace the mantra of best people and places. Between now and closing, our goal is to complete the integration planning process, then once the transaction has closed we are in a position to begin.”

He said he hopes to complete the integration process within a year following the deal.

Avnet chief speaks out over Bell acquisition

Roy Vallee ponders the future of the Bell Micro brand and talks integration

In terms of keeping the Bell name, Vallee said the decision has not yet been made and was something that would be dealt with in the planning phase.

“But I will put my neck on the line and say I think it will probably be integrated [into Avnet] as opposed to being retained,” he said.

In terms of redundancies, Vallee said there would be some.

“There are redundancies pretty much in any transaction, but it will happen from the top down,” he said. “The first synergy will be Bell’s board of directors – such as accounting firms, legal teams. We start with the corporate centre – that is what usually ends up happening.

“What I think will happen is there will be some redundancies at the corporate and back-office function levels. We will try and retain as many of the front end – people involved with customers and suppliers – as possible.”

Vallee added that the only part of the business that he is looking to sell off is Bell’s value-added resell business.

“About 15 per cent of the 2009 revenue that Bell did was through two VAR brands – Total-Tec Systems and ProSys – both of which are due to be merged into one $400m business,” he said. “We are pretty committed to the technology distribution space and in this case we are going to evaluate strategic alternatives. It is no surprise if we divest that part of the business and make ProSys an important customer rather than a direct asset.

“We have no plans to divest any other parts of the business,” he stressed.

Vallee added that the feedback from Avnet’s suppliers and customers had been "unanimously positive".

“Avnet has strong vendor relationships and we work hard at that," he said. " Our brand statement [to vendors] is accelerating your success and we deliver value that way. Bell is also a company with very strong vendor relationships. Bell was a good company, but with the financial resources and capabilities of Avnet, it will be an even better company.”

In terms of staff, Vallee said Avnet’s staff are positive, but on the Bell side he acknowledged there was "a little bit of melancholy".

“The company has gone through some significant challenges over the past two to three years and had financial constraint,” he said. “The Bell team has come through that amazingly. Now they are emerging from that battle and thinking, ‘Gee, that is too bad as we are going to be losing our sovereign identity’. But I feel that once they have had the opportunity to deal with their emotions and they get to experience the financial scale and scope of Avnet, this will become easier for them.”

Vallee said size was vital to survival in the industry.

“This is our largest acquisition ever in revenue terms and also in the IT space, and we are very excited about it," he said. "We believe passionately that global scale and scope are vital to success in the global technology business.”