Tech Data boss Zammit: We didn't lose much market share with Avnet merger
European boss Zammit also says the distie has moved a small percentage of UK inventory to mainland Europe ahead of Brexit
It took Tech Data almost 18 months to integrate the Avnet Technology Solution's (TS) business in Europe after the acquisition closed in February 2017.
What exists today is a $19.7bn-revenue behemoth in Europe.
Tech Data's European boss, Patrick Zammit, has been leading a fully-integrated Tech Data Europe for the last six months.
He claims that, overall, the integration "met expectations" and is widely considered a success despite Tech Data losing some market share during the 18-month process.
"We've done pretty well. We haven't lost much market share, that's important to note, because there was some speculation that we would," he said.
"All in all, now the integration is complete, we are back fully focussed on our partners. This is very important. When you look at it from a vendor standpoint, all in all we maintained our market share very well… We came out of this integration with a strong position which we could maintain, and that was really fantastic."
Tech Data's financial figures after closing the Avnet deal in February 2017 did little to convince investors that the new, larger Tech Data was a safe bet. Its shares fell by as much as 19 per cent overnight after missing gross margins and earnings targets in its Q2 figures.
But the distributor has been mounting something of a comeback since - its Q3 ending 31 October sent its stock price up 15 per cent after reporting an 11 per cent revenue increase to $9.3bn.
Unlike the US market, Europe's distribution landscape is still undergoing significant change, said Zammit. Regional distributors are following Tech Data's example by expanding into new regions and consolidating the market.
"I believe that, going forward, there will be further consolidation in the market," he said. If you compare the European market to the US market, for example, there's still some room and a lot of local and regional players. So I am expecting that.
"For us it is interesting because [Avnet TS] is historically strong in eastern Europe, but we decided to be more specialised in infrastructure or the Advanced Solutions business.
Back in the M&A game?
But Zammit said that although Tech Data could acquire niche European players around specific technology areas, the distributor will not be participating in M&A to build critical mass, especially for its end-point business.
"As far as I am concerned, for Tech Data acquisition continues to be part of our strategy, but I don't think we will make major acquisitions.
"Generally speaking, we don't think we are lacking critical mass in any of the markets where we are placed. But on some as the specialities we may have to make some acquisitions in some countries where we don't have the critical mass.
"We are going to be focused in particular on next-generation technologies and security. In those areas, if we see we can strengthen our position by making a local acquisition, we will go for it."
Planning for Brexit
Over the last few months, a host of distributors have revealed that they've set out plans to stockpile inventory ahead of the 29 March Brexit deadline.
Tech Data, meanwhile, has moved a small percentage of its UK inventory to mainland Europe ahead of the Brexit vote, according to Zammit.
The distributor has shifted some networking, unified comms and components inventory to an existing warehouse in Bor, in Czech Republic.
Tech Data's UK facilities were previously used to keep a small amount of inventory for customers in mainland Europe, which will no longer be the case, according to Zammit.
He said the inventory that has been moved to Czech Republic represents "less than five per cent" of Tech Data UK's total inventory.
"We are talking about a limited number of vendors and some inventory which we will move back to continental Europe to serve Europe. The UK will remain completely independent so we can serve the UK after Brexit," he said.
He added: "Keep in mind the Tech Data structure is decentralised, which explains why the impact is very limited. The countries buy and sell locally, so that's the reason the impact is going to be minimal."
Zammit sounded a note of caution that business on the continent will continue to be difficult.
"The European market, contrary to the US market, is not doing so well. As you know we have a big slowdown in the economy, we have Brexit as a main threat, and some political issues in countries is having an impact on the morale of the investors," he said.
"And we continue to see a highly competitive environment in Europe impacting in particular our End-point Solution division - the PCs, printers and so on.
"Competition remains very fierce, but I would say in distribution, when you look at the macro trends, it is not a surprise. That's the reason why scale is so important, so you can continue to adjust in that environment."