Avnet Acquires Magirus to Expand in Europe

Avnet, Inc. has agreed to acquire the Magirus Group, a pan-European distributor of data center solutions and services.

Magirus is a VAD of software, systems and related services encompassing virtualization, storage management, cloud computing, security, intelligent networks and information life-cycle management services.

Through its professional services portfolio and knowledge of the IT sector, Magirus enables business partners to take new technologies to market in eleven markets throughout Europe and the Middle East. The transaction, which is subject to normal regulatory approvals, is expected to close in October 2012.

Phil Gallagher, president of Avnet Technology Solutions, Global, commented: "The acquisition of Magirus will significantly enhance our competitive position in Europe and the Middle East by expanding our suite of solutions in high-growth technologies. Magirus increased its revenue 20 percent in calendar 2011, delivering powerful, flexible and cost-effective data center solutions from a breadth of suppliers, including Cisco, VMware and EMC. We welcome the knowledge and expertise of their talented management team and staff, who will allow us to further enhance the value we provide to our customers and suppliers."

Founded in 1981, Magirus has 400 business and technical professionals that help over 4,500 resellers, system integrators and IT service providers develop and deploy IT infrastructure solutions that bring together traditional server, storage and network operations so that constantly changing business requirements can be supported more efficiently. Its services span demand generation, pre-sales, consultancy, training, certification, implementation as well as support from its pan-European, multi-lingual support center. Magirus generated revenue of approximately US$530 million in the 2011 calendar year, and will be integrated into Avnet Technology Solutions’ EMEA business.

Graeme Watt, president, Avnet Technology Solutions EMEA added: "Magirus is a high quality focused business and represents an excellent expansion to our current operations as it adds complementary product lines across the region while meaningfully increasing our scale in important markets including Germany and France. Magirus’ position with market-leading suppliers in high growth technologies will bolster our solutions practices and create significant cross-selling opportunities in the combined customer base. Its business model is a strong fit with our strategy to provide more value-add services, and the combined expertise of both organizations will enable us to accelerate the success of our customers and suppliers."

This acquisition is expected to be immediately accretive to earnings and achieve Avnet’s return on capital goal of 12.5% within two years.

Comments

$26.5 billion company Avnet is one of the biggest worldwide wholesale IT and storage distributor in the world, and without discussion since it acquisition of Bell Micro in 2010 for $631 million. And the US distribution giant continues to expand, gobbling Magirus, supplier of IT solutions, especially in Europe.

Established in 1981 to sell branded computer systems and peripherals and positioning as VAD since 1990, the German company based in Stuttgart is privately held and doesn't disclose financial figures. But in the press release you can read that it generated revenues of approximately $530 million in calendar year 2011 with a growth of 20%.

It means that Avnet paid a sum not far from $100 million for Magirus, considering that, in the distribution market with small margins, a company is generally evaluated at something like 20% of its annual sales. As an example the percentages were 21% for Avnet/Bell Micro acquisition in 2010 and 17% in Arrow/Altimate deal last April.

The beneficiaries of the operation are the three shareholders of Magirus:

the von Kuenheim family, in Munich (42.5%),

the Magirus family, in Stuttgart (27.5%), and

Group Alghanim & Alkharafi, Safat, Kuwait (30.0%).

The VAD is working with 4,500 resellers and integrators, and employs 400 people mainly in Europe (Germany, France, UK, Switzerland, Belgium, Denmark, Italy, Netherlands, Portugal and Spain) but also in Middle East (Dubai, UAE, an Ryad, Saudi Arabia).

It provides software, systems and related services in thee countries with a strong activity in storage, representing companies including EMC, Dell, Cisco, Brocade, DataCore, VMware and Veeam.

Avnet, in electronic components, enterprise computer and storage products and embedded subsystems with 100,000 customers and 300 suppliers, is also a big storage distributor in the world reselling EMC, Oracle, Brocade, CommVault, Cisco, Riberbed, FalconStor and Tandberg, among others, through its Avnet Technology Solutions subsidiary ($11.5 billion in FY2011) that will integrate Magirus.

The company doesn't publish specific numbers for storage but this activity is growing. In a SEC filing, it stated that storage device revenues increased more than 20% on a yearly basis in 2FQ12 ended December 21, 2011. That's the only figure we found.

In 2007, Avnet already acquired part of Magirus, more precisely its IBM and HP server and storage business.

The same day, Avnet acquired Magirus and also Altron GmbH & Co. KG, in German passive components distribution.

Four big companies, all of them from USA, are dominating the IT wholesaler market in the world and in Europe:

Ingram Micro ($8.6 billion in total revenues for last financial quarter),

Avnet ($6.3 billion),

Tech Data ($5.9 billion), and

Arrow ($4.9 billion).

Avnet could be the first one in storage following its acquisition of Bell Micro that was considered as the WW leader storage distributor.

Storage Acquisitions of Avnet

Year

Acquired firms

Price*

Activity

2007

Acal
(some assets)

UK-based storage wholesaler

2007

Magirus
(some assets)

IBM and HP server
and storage distribution

2008

Horizon Technology