Apollo begins countdown to Tech Data acquisition

Private equity firm Apollo Global Management has inked an agreement to acquire distributor Tech Data Corp. But the buyout terms leave the door open for other suitors.

Tech Data, based in Clearwater, Fla., ranks among the top IT distributors, offering resellers a range of hardware, software, networking gear and consumer electronics products. The company has also moved into cloud distribution in recent years, providing its StreamOne Cloud Marketplace.

The transaction, expected to close in the first half of 2020, has an enterprise value of about $5.4 billion, according to Tech Data. Enterprise value is a measure that takes into account factors beyond market capitalization. Rumors of the Tech Data acquisition surfaced in October.

Apollo may not have the final word in the Tech Data acquisition, however. Tech Data, in a filing with the Securities and Exchange Commission, said it has the right to solicit or encourage “an alternative acquisition proposal.” That so-called “go shop” provision expires December 9.

“Institutions clearly believe there will be a higher bidder than Apollo,” said Marty Wolf, president of martinwolf, a merger and acquisition advisory firm based in Scottsdale, Ariz. “There have been large blocks traded above [the] purchase price” of around $130 per share.

Tech Data’s current valuation of 7x 12-training-months EBITDA “is historically not very high,” he added.

If Apollo’s bid prevails, the Tech Data acquisition would add IT distribution to the investor’s technology holdings. Apollo has some history in managed services. In 2016, Apollo in 2016 acquired Rackspace, a managed cloud services company based in San Antonio, in a $4.3 billion deal. Apollo has also invested in Presidio, an MSP and consulting firm based in New York.