Arrow Electronics has acquired Distribution Central, in a strategic move designed to bolster the distributor's Australian market share.
"The addition of Distribution Central to our presence in the region expands and strengthens Arrow’s business in the value-added distribution marketplace," says Sean Kerins, President of Global Enterprise Computing Solutions, Arrow.
"This acquisition supports our strategy to expand Arrow’s portfolio and build strategic capabilities to help meet the evolving needs of our customers."
The buyout follows Arrow's local acquisition of Observatory Crest in October 2014, a distributor of IT security solutions and services based in Sydney.
"The combination of Distribution Central and our capabilities from the earlier Observatory Crest acquisition makes Arrow the leading value-added distributor in the region," Kerins adds.
Revealed to ARN during the early hours of Monday March 14, the acquisition sees Arrow become one of the largest distributors in the country behind Synnex, Dicker Data and Ingram Micro.
The Colorado-based company is rumoured to have had its eye on Distribution Central for over a year, but bosses Scott Frew and Nick Verykios have remained coy on any interest, refusing to confirm or deny despite ongoing industry speculation.
But Distribution Central’s recent success with emerging brands such as Simplivity and its newly acquired lucrative Hewlett Packard Enterprise (HPE) portfolio looks to have brought the two parties closer to an agreement.
Terms of the deal will see both companies continue to operate as separate entities for at least the next twelve months with the integration process still in its early stages.
With market dominance in Australia as its top priority, the purchase of Distribution Central helps form part of the bigger picture for Arrow, as it prepares for direct competition with Westcon-Comstor and Avnet following its vendor acquisitions.
Locally, Arrow has around 40 staff in Australia and revenue of approximately $4.2 million per employee, while Distribution Central operates 130 staff at around $2.4 million per employee.
Distribution Central's current vendor roster includes: Amazon Web Services, Arista Networks, Aruba Wireless Networks, Avaya, Blue Coat Systems, CommVault, Device42, Emerson Network Power, Equinix (DC), Extreme Networks, F5 Networks, Fujitsu Australia, Infoblox, Jabra, MobileIron, NetApp, Palo Alto Networks, Pure Storage, Quantum, Riverbed, Sandisk, SimpliVity, SIPcity, Softlayer, Sonus, Sophos,Sumologic, Varonis and Xirrus.
Meanwhile, Arrow’s current vendors include: Check Point, F5, FireEye, Gigamon, IBM Security, Venafi, Blucat Networks, HP Enterprise Security, MobileIron, Algosec, Forescout, Tintri and Infinidat.
At present, the only current cross over between the two companies is F5 Networks and MobileIron.
In addition, Arrow is also set to takeover sole distribution of two of Oracle’s “pillars”, one of these being security with the other unknown at this point. How - and if - this affects NEXTGEN Distribution is one of the questions on the table.
Globally speaking, Arrow serves as a supply channel partner for more than 100,000 original equipment manufacturers, contract manufacturers and commercial customers through a global network of more than 460 locations in 85 countries.
A long time coming?
The acquisition follows ongoing industry speculation that the distributor was bracing itself for a defining year in the channel, as rumours mounted of a possible market listing or potential acquisition in the early New Year.
With an IPO now out of the window, the channel continues to go mergers and acquisitions crazy with Ingram Micro buying Connector Systems, before being bought by Tianjin Tianhai a week later.
As outlined to ARN previously, CEO Nick Verykios believes the company will turnover $600 million during the next financial year, with many believing such a figure to have proved the final piece in the jigsaw with regards to Arrow making its acquisition move.
With a healthy bank balance and strong vendor portfolio, coupled with revenues surpassing $313 million during 2015, it’s clear that Distribution Central has always appeared ripe for acquisition.
The distributor’s much publicised Hewlett Packard Enterprise victory in early February, bringing an estimated $200 million in extra revenue, added weight to common market knowledge that the company was open to being acquired, as has been the case in the past.
But while Distribution Central’s hierarchy has always refused to confirm speculation, Frew is widely regarded as a 'build it and sell it' type of businessman, telling BRW in 2013 that he indeed “builds and sells businesses”.
Founded in 1992 as Firewall Systems, an IT security services provider, the company was acquired by Frew and Verykios in 2004, with Frew founding LAN Systems - now Westcon-Comstor - and both founding 1World Systems and Micro Networks.
- Chris Player and Mike Gee contributed to this article
