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Ingram Micro's new chapter could see ‘aggressive growth and transformation’

Ingram Micro's new chapter could see ‘aggressive growth and transformation’

Following its purchase by Platinum Equity, the distributor is now in a position to pursue its own M&As while diversifying its traditional offerings

Alain Monié (Ingram Micro)

Alain Monié (Ingram Micro)

Credit: Ingram Micro

Last week, Platinum Equity sealed its long-running bid to buy Ingram Micro in what was the largest IT distributor acquisition in history. 

Forking over US$7.2 billion, the American private equity behemoth’s purchase of the world’s biggest distributor eclipsed that of fellow PE firm Apollo, which nabbed Tech Data for US$6 billion earlier this year. 

Yet, with an asset base worth around US$23 billion, Platinum Equity still has plenty to play with when it comes to Ingram Micro – and, according to analyst firm Canalys – the IT industry can expect “aggressive growth and transformation” on the horizon. 

Investment 

Ingram Micro has been around for more than 40 years, but under its previous owners, Chinese conglomerate HNA Group, growth has been somewhat stagnant.  

According to Canalys, since HNA’s US$6 billion acquisition in 2016, Ingram has carried out only a limited number of its own M&A-related activity, and these were “small and selective” at best.  

Yet, with the “substantial investment heft” of Platinum Equity propping it up, Ingram is in a prime position to grow its global footprint from the 52 countries, 125 logistic centres, and US$50 billion revenue it tallied during the 2018 calendar year. 

Under Platinum, Asia Pacific and Latin America are likely to be key regional priorities for Ingram, with Canalys claiming it has recently taken steps to extend its reach in both. In Australia and New Zealand, Ingram is already being led with a fresh pair of eyes in the wake of Felix Wong’s departure earlier this year, ending his five-year tenure as country manager.  

Meanwhile, in the wider Asia Pacific (APAC) region, Ingram will be “keen”, claimed Canalys, to strengthen its regional position against an enlarged Tech Data, which recently closed the acquisition of Hong Kong distributor Innovix

Staying 10 steps ahead of Tech Data will remain a key element of Ingram Micro’s strategy going forward, Canalys added, following the former’s own recent buy by Apollo. 

Critically for Ingram, its number one competitor has committed to spending US$750 million in digital capabilities and solutions in areas like artificial intelligence (AI) and security. In the words of the analyst firm, Platinum must be prepared to match this level of spending. 

Digital transformation 

Ingram may have invested significantly into diversifying its offerings over recent years, including its cloud arm, services business and marketplace. However, claimed Canalys, product distribution still remains close to 90 per cent of its total revenue.  

Although the analyst firm expects Platinum to invest in new transformation areas for the business, such as cloud services, advanced solutions and, perhaps most importantly, digital platforms, this will need to be a hefty amount if Ingram is to match Tech Data. 

Although product distribution has increased Ingram’s profitability during the COVID-19 pandemic, ideally the PE giant will want to increase spend on new potential areas of profit.  

For example, Ingram’s e-commerce fulfillment business has boomed as a result of lockdowns across the globe. Meanwhile, its cloud practice will only grow with further investment, argued Canalys. 

US relief 

For American and Australian vendors, the return of Ingram from Chinese to US hands will come as a relief. With an ongoing trade war between China and the US continuing, and Australia embroiled in its own diplomatic face-off, a return to the US will give vendors “greater confidence” to invest in Ingram.

“Ingram has been sold in its entirety, avoiding the need for a complex company break-up and it is back in the hands of US owners, which will be a significant relief for US vendors, channel partners and the US government, as well as providing greater assurances in other key Western markets,” Canalys added. 

For the immediate future, Ingram’s fortunes look strong, with its 2020 first three quarterly profits rising, while its 2019 profits grew by 12 per cent to US$820 million. 

However, areas of caution remain as COVID-19 reduces its sales, especially in areas such as critical infrastructure solutions. And yet, while new blood has been injected at a local level, globally the future remains uncertain about global CEO Alain Monié's succession plans as he approaches retirement.

Platinum Equity said that upon closing its acquisition deal, Monié will continue to lead Ingram Micro as CEO, and the company will continue to be headquartered in Irvine, California.

But it is still unclear whether, in the long run, the Platinum deal will see a leadership changeover – and if so, who that will be. However, Canalys remained optimistic in its outlook for the distributor’s future. 

“Ultimately, the industry will be relieved that this rather sorry period in Ingram's history has come to an end and a fresh, new chapter can begin,” it said.


Tags Ingram MicroPlatinum Equity

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