It took Tech Data almost 18 months to finally integrate the Avnet Technology Solution's (TS) business in Europe since the acquisition closed in February 2017.
Germany was the last of Avnet TS' businesses to fall under the distributor's blue-and-white banner, several months after merging entities in the UK, France, Belgium and Italy.
What exists today is a $19.7bn-revenue behemoth in Europe. The addition of Avnet TS brings Tech Data into eastern Europe and has secured critical mass in Belgium, Italy, Spain, the UK and Germany.
Tech Data's European boss, Patrick Zammit, has been leading a fully-integrated Tech Data Europe for the last six months.
Speaking to CPI, he said 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.
ALSO's tender offer for €1bn-turnover Polish distributor ABC Data is evidence that even Europe's biggest fish aren't impervious to market consolidation.
"I believe that, going forward, there will be further consolidation in the market. 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. You see that ALSO continues to make acquisitions in eastern Europe to consolidate the market, so that's one example," he said.
"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. We are seeing that expansion as probably a good thing because ALSO is a reputable and very compliant distributor so we think it is a good thing that this consolidation is happening."
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
Several distributors, including Tech Data, Esprinet and ALSO, have warned that intense competition in Europe is forcing down prices and putting pressure on profit margins, encouraging distributors to add scale through M&A.
This, coupled with gloomy outlooks for Europe's economy has prompted Zammit to sound a note of caution that business on the continent will continue to be difficult.
Echoing the warnings of several reseller CEOs including Softcat's Graeme Watt and WWT's Jim Kavanaugh, the Tech Data boss also cited the negative impact of macroeconomic uncertainty in Europe.
"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."
Over the last few months, Exertis and Westcoast have revealed that they've set out plans to stockpile inventory ahead of the 29 March Brexit deadline. Exertis has set up an extra warehouse in Basingstoke to store technology from vendor Sonicwall, while Westcoast has bought extra space across two warehouses to stockpile a "large amount" of stock.
Tech Data, meanwhile, has in fact 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.
"[The Bor warehouse] is a key warehouse for Tech Data historically, so that's where we're going to move the goods. Again, only to serve continental Europe."
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."
Aside from navigating the huge consolidation efforts of its regional competitors as well as macroeconomic pressures, Zammit outlined some key growth initiatives for Tech Data for this year.
The European boss said he will prioritise growing Tech Data's footprint in the SMB space through offering tailored digital marketing tools for this strand of the market. The push follows on from its "Credit Elevator" scheme launched in the UK last year which trebled credit available for SMBs to £1m.
UK and Ireland boss Andy Gass took on a new European role last year as SVP of digital, and is leading a 25-strong team to develop these tools for SMB customers.
"The main reason is that all of our vendors today are increasing the rewards for recruiting and enabling the SMB customer base," he said.
"Today, I would say we are probably too general in how we approach them. But now we are leveraging the data insights we have to make them the right offers from a product and pricing standpoint," said Zammit.
Elsewhere, he said managed print services will be Tech Data's main investment on the end-point side of its business, while security, cloud and analytics will be the key growth areas for its Advanced Solutions division.
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