Publicly traded Tech Data has agreed to be acquired by Apollo Global Management at an enterprise value of $5.4 billion or $130 per share. The EBITDA valuation multiple for this transaction appears later in this article.

Tech Data is a distributor of information technology products including software, networking and communications, mass storage, peripherals and computer systems. In addition to distributing more than 75,000 products from over 1,000 manufacturers and publishers, Tech Data provides pre-sale and post-sale training, service and support. The company also offers data center services including storage, networking, servers, and advanced technology software.

Tech Data’s customers include value-added resellers, direct marketers, retailers, corporate resellers, and managed service providers located in more than 100 countries in North America, South America, Europe, the Middle East, Africa, and the Asia-Pacific region.

Tech Data was founded by Edward Raymund in November 1974 as a reseller of data processing supplies for mini and mainframe computers. In 1983, the company began to transition from just a reseller to a full-line national distributor of personal computer products, a transition led by Steven Raymund, the founder’s son, who became Tech Data’s CEO in 1986, the same year Tech Data went public. Today, Tech Data (NASDAQ: TECD) is ranked No. 88 on the Fortune 500 and is led by CEO Rich Hume with a headquarters in Clearwater, Florida.

“Over our 45-year history, Tech Data has grown to become one of the largest and most respected technology distributors in the world,” said Mr. Hume, who will continue to lead the company under Apollo ownership. “This agreement reflects the significant progress we have made in our strategy of delivering higher value and positions us for continued growth and success.”

Over the last four quarters, ending July 31, Tech Data had revenues of $37.1 billion, gross profit of $2.3 billion (GPM of 6.2%) and $675 million of EBITDA (EM of 1.8%). With an enterprise value of $5.4 billion, this yields an EBITDA valuation multiple of exactly 8.0x.

“Through this investment, we are committed to expanding Tech Data’s position as a trusted partner to the world’s leading technology vendors while providing best-in-class customer service,” said Matt Nord, co-lead partner of Apollo Private Equity. “As a private company with our sponsorship and a strong balance sheet, Tech Data will have significant financial and strategic flexibility to drive growth going forward.”

Apollo’s (NYSE: APO) private equity funds have acquired more than 150 companies since its founding in 1990 and has more than $77 billion in assets under management. The firm’s latest private equity fund, its ninth, closed in 2017 with more than $24 billion of capital commitments.

Tech Data’s board of directors has unanimously approved the transaction with Apollo and has recommended that its shareholders vote in favor of the transaction. The purchase agreement includes a go-shop provision through December 9, 2019.

Apollo’s offer for Tech Data is not subject to a financing condition and the transaction is being backed by Citi, J.P. Morgan, Wells Fargo, Barclays and RBC Capital Markets.

Citi is the lead financial advisor to Apollo in connection with the transaction with J.P. Morgan and Wells Fargo also serving as financial advisors. Bank of America Securities is the financial advisor to Tech Data.

The transaction is expected to close no later than June 30, 2020.

© 2019 Private Equity Professional | November 14, 2019

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