High spirits on the Horizon

The biggest challenge in any takeover is maintaining staff morale and retaining key people during the crucial integration period.

For Avnet, which has made four acquisitions in the past 18 months, its recent €98.5m takeover of Anglo-Irish
distributor Horizon Technology was no mean feat (CRN, 7 July). Horizon itself had made a number of acquisitions before Avnet came on the scene, and was split into several different business units.

However, the message from both businesses is that keeping hold of talent is key and the integration of the two firms is not something that will be done in a hurry.

Indeed it is business as usual for each side, with Horizon retaining its name and operating as a separate business unit for the time being, and a special integration committee has been formed to analyse the company going forward.
Matthew Gower, vice president of Avnet Technology Solutions for the UK and Nordics, is heading up the process.

“Avnet has been going since 1921 and has been acquiring for the past 60 years. The major drivers for acquisition have been two-fold: because of consolidation in the industry; and to expand our technology to move into other areas that we do not have.

“Horizon has loads of technical expansion areas that are very exciting for us and a huge opportunity, such as networking, security, storage, business intelligence and unified communications.”

The two firms are sizeable organisations. Avnet’s EMEA operation turned over $1.6bn last year, with 1,200 employees in 20 locations across the region. Horizon employs 150 people in Ireland, and 200 in the UK. Last year it turned over y300m.
Gower said resellers are evolving their business models into more solution-provider roles, and Avnet intends to help them achieve that goal.

“We are seeing an evolution of the reseller channel. From a value-added distribution point of view ­ if that is how VARs are evolving ­ we see our role as helping them achieve their aims.”

Best of both worlds
In terms of the branding of Horizon, Gower said Avnet is keen not to rush into anything. He also stressed that the acquisition would benefit both sides.

“The reason for the acquisition is to push Avnet up the value chain,” he said. “We do not want to rip Horizon asunder ­ clearly we are a business and all businesses asses performance and business strategy. We are taking baby steps ­ there is no way we are going to rush ahead and leave it as a half-baked idea.”

Matt Tedstone, chief operating officer at Horizon, who is part of the integration team, is also confident. “Avnet knows our core values and we are confident that we can retain customers, personnel and esteem, helped along by our reseller
community,” he said.

The combined company of Horizon and Avnet will have around 4,000 customers, carrying 100 vendor lines. Gower added that Horizon’s reseller base will now have access to Avnet’s new resource centre ­ which allows VARs to bring customers into the premises and run demonstrations, or proof of concept tests.

“We will have plenty to offer resellers. We have a strong presence in EMEA and globally and if there are resellers that are looking to expand their presence we can help them do that,” Gower said.
Tedstone added that the acquisition will enable Horizon to pursue expansion plans.

“We have always wanted to invest in the UK and eventually across Europe. We have managed to establish a dominant position with almost every vendor with which we work. We hope that we can now use this acquisition as a springboard to talk to the same vendors across Europe. We have not been able to do that in the past.”

Tedstone also stressed that despite industry rumours, the Horizon board were sticking with the company.
“The existing management structure with both Horizon and Avnet will stay in place. We are a tight management team.
“I know where the key people are and they are with Avnet right now. It is absolutely business as usual.”

Gower agreed: “Most of the managers have come to Avnet as a result of an acquisition. Through acquisition we get the contacts, but we also get the talent and this is what will take the business forward.”

Simon Welch, commercial director at Horizon, also refuted industry rumours. “From an insider point of view when the idea was first mooted ­ not knowing much about Avnet ­ it was a slightly scary proposition. But it feels much more like a merger than an acquisition now it is underway. We will now be able to do things that we could only dream about in the past.
“This is not the take-over of a troubled business. There is no fiscal need to do this. Horizon could not scale in the market on its own and this acquisition will give us an interesting position in the UK market,” he said.

On the money
The wider industry agreed that the acquisition was a shrewd move.

Jeremy Davies, founder of analyst firm Context, said: “For a while people have been talking about consolidation because of the simple basic principle of economy of scale. Mergers are not easy and people do this to be able to operate on a larger scale.

“Times are tough and credit is tough ­ distribution’s whole raison d’être is providing value to the channel. Avnet has a great deal of credibility and it has value that it can offer through merging with Horizon.”

Eddie Pacey, director of credit at rival distributor Bell Micro, said: “Mergers and acquisitions and the reasons for them are not necessarily affected by economic or market conditions although the latter does prove a catalyst. We will see more of these right across the channel in the remainder of this year and into next.”

Nitin Joshi, founder of ChannelMoney, agreed: “This is a good move on Avnet’s part ­ I can see a lot of consolidation going on at a distribution level. And there will be more coming up. There are some good
buyers out there and it is a buyer’s market.”

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