SDG takeover - the channel reaction
Tech Data's peers believe £219m deal will benefit resellers
Computer 2000 parent Tech Data's shock acquisition of SDG has been greeted as positive news for the channel by rivals and resellers.
As reported by ChannelWeb, Tech Data has agreed to shell out about €277m (£219m) to acquire SCH's pan-European distribution business in a move that will consolidate its position as the UK's largest distributor and boost its position with vendors including HP and IBM.
The deal, which will add $2.34bn to Tech Data's top line across Europe, is set to close in Q4.
Alex Tatham, commercial director at rival distributor Westcoast, congratulated Tech Data on landing what he described as an "excellent business with excellent people".
"Tech Data will rightly be delighted to have got the business," Tatham said. "As long as they keep SDG in great shape and invest in it, I think this is good news for the channel."
SCH has operated a hybrid distributor-reseller model for 25 years but chairman Peter Rigby said "the opportunity to maximise our return on investment and deploy a single focused strategy with SCC has become more apparent".
Frank Salmon, managing director of CMS Peripherals (pictured below), said SCH's decision to ditch its hybrid model would benefit the channel.
"The hybrid model was always a challenge for both its vendors and customers," Salmon said. "Having clarity and alignment in the channel is important and from that perspective, I welcome this."
SCH's divestment of SDG echoes arch rival Computacenter's decision to sell off its distribution arm, CCD, to Ingram Micro in 2009. At the time, SCH stressed it was committed to investing in SDG - even hinting that it would make further acquisitions of its own - but Salmon said its move to follow suit was no surprise.
"If you look at the margins in distribution, over the past three or four quarters they have decreased quarter on quarter and the landscape is becoming more competitive," said Salmon. "In terms of creating shareholder value, distribution is not the most attractive place to be and if it was diminishing SCH's share value, then why would they want to be there?
"Distribution consumes a lot of cash that could be used to generate much higher income in reseller land."
Yuri Pasea, managing director of niche virtualisation distributor Prianto, also welcome the move.
"This is no surprise to me," he said. "There has been a consolidation of the distribution space for five years and after Magirus was sold [to Avnet], SDG was the only semi-big [independent] distributor remaining. It is great news for someone like me, who is now an independent among the giants."
Loay Lawrence, commercial director at VAR Vohkus, said: "We have a good relationship with both SDG and C2000. This gives them the breadth of new vendors such as IBM, Citrix and VMware to complete its Azlan portfolio."
Lawrence said SDG's status as a hybrid had not been an issue but that its acquisition by Tech Data would mean there are "now no grey areas".
Justing Harling, managing director of VAR CAE Technology Services, agreed: "We work with both distributors as I think much of the channel does. It certainly gives Tech Data access to a complete infrastructure portfolio with massively enhanced virtualisation capabilities that fits extremely well into what we are offering our customers. They have also picked up some very good people; it now depends on how well the businesses can be integrated. Get it wrong and one plus one will equal less than two but there should be more than enough combined experience to get a positive result.
"Consolidation in manufacturers and distributors has been viewed as inevitable but it seems the reseller market is stubbornly resisting the same fate - for how long?"
Steve Ellis, managing director of VAR APSU, which buys its Wintel equipment from SDG-owned brand ISI and Cisco gear from Azlan, cautiously welcomed the move.
"It is the people we buy from, not necessarily the company. As long as we get the same type of service from the same people I can't see any issue," he said.
Ingram was understood to have been in the frame to buy SDG earlier in the summer but Ellis was not surprised by the outcome.
"The rumour mill has been going on for three months and we expected when it was sold for it to be either Ingram or Tech Data," he said. "The distribution market is consolidating into a small number of multi-national players so it makes sense that SCH has move that business on."
"I can see why [SCH's] hybrid model could have been an issue. But in all the years we dealt with them, it never was, as we aim at a different target market from SCC. We do very little business in the public sector and signing framework agreements with large enterprise customers, which is what SCC is good at."
Richard Gibbons, software manager at VAR Bechtle, said: "SDG have a reputation for being very good at the more 'specialist elements', we use them for VMWare, Citrix, Veeam etc. TechData/C2000 will need to ensure they keep that ethos going forwards and make sure the SDG teams don't become lost within the larger C2000 organisation.
"I have three or four key contacts within SDG that are great to work with and it would be a shame to lose those."
Alastair Kitching, chief operating officer of VAR Esteem Systems, said SDG's sale to a pure-play distributor would improve his relations with the firm.
"There has always been a feeling of slight discontent working with SDG, knowing its parent company owns a large competitor. You are doing business with a company that is generating profits that are potentially going towards funding SCC, which is not a comfortable situation."