Arrow Electronics Acquisitions Increase Buying Power, Services

By Alison Diana  |  Posted 2007-04-24 Email Print this article Print
 
 
 
 
 
 
 

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The distributor has embarked on a string of purchases to solidify its market position.

Successful acquisitions may be one part science and one part art, but distributor Arrow Electronics believes it has honed the practice through a series of about 60 acquisitions in the past decade.

And this is critical, since distributors are often vendors' lifeline to the channel. Ensuring seamless integration of another distribution company's operations, employees and product lines makes the difference between success and failure: Certainly, no distributor wants to see VARs fleeing en masse from their newly-acquired organization.

Most recently, the Melville, N.Y., distributor bought former competitor Agilisys KeyLink Systems Group for $485 million and entered into a long-term procurement agreement with the Agilisys Enterprise Solutions Group, a VAR. Arrow is taking channel customers' concerns about preferential treatment of the Solutions Group head-on, said Paul Reilly, senior vice president and chief financial officer at Arrow.

"I think it's a natural concern for any customer when there's a larger customer that there'll be preferential treatment," he said. "We've always been very careful to have a Chinese wall – and we actually refer to it that way. I think generally the customer base is comfortable with us. There is also self-policing by our internal sales people."

Arrow wanted to acquire the assets and operations of KeyLink in order to expand the range of products – especially from key vendors such as IBM and Hewlett-Packard, said Reilly. "We and Agilisys competed with each other. We were able to become a stronger company when combined," he said. "It makes us stronger, gives us more mind share and enables us to have a deeper relationship with suppliers."

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Equally important is Arrow's immediate employment of more than 500 educated and knowledgeable staffers, Reilly said. In fact, the distributor hopes to retain all KeyLink's sales and marketing personnel, he said. This will allow existing Arrow and KeyLink solution provider customers to continue working with the same sales representative, he said, a concern that channel companies frequently bring up during the acquisition process.

"It is key to assure [VARs] that nothing will change, in fact services will be enhanced, especially for key customers" said John Challenger, president of Challenger, Gray & Christmas, a Chicago-based outplacement consulting organization.

In instances where former foes unite – such as with the Arrow and KeyLink deal – it is important for the acquiring company to spend the time dealing with the pre-existing mind-set where employees and customers are encouraged to seek the weakest points of the former competitor, said Challenger. This is something Arrow is working on, said Reilly.

"It's natural to point to the weaknesses of competitors. It's one of the things we're attuned to," Reilly said. "We come forth and say we're going to make the programs even better. In fact, the vast majority of [our customers] were very enthusiastic about this particular merger because they saw it as a sign we wanted to invest even more in the business."

In an effort to retain former KeyLink sales and marketing teams, Arrow immediately incorporated them into its sabbatical program – giving credit for employees' years at KeyLink, meaning some who worked for KeyLink for seven or more years are eligible for the 10 week paid sabbatical almost immediately, said Reilly.

"We want to show we appreciate how hard we work," he said.

Solution providers will benefit by Arrow's extended product line and its integration of elements of KeyLink's services, said Reilly.

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"We want to make it so one plus one equals more than two," he said.

To allay any concerns facing solution providers, vendors or employees, Arrow spent about 90 days in a flurry of talks with each of these important groups, said Reilly.

Of course, due to federal full disclosure regulations, the distributor could not pre-inform anybody, but on the day the news hit, Arrow's well-oiled acquisition team went into full gear, he said. But the distributor makes certain that, on the day of the acquisition, former KeyLink employees had Arrow business cards, phone numbers and other tools of the trade already in place.

"We have a team of people who, on the day of the announcement, are onsite at all the significant operations we've acquired," said Reilly.

For example, KeyLink already had scheduled an event for some of its key solution providers on the day Arrow made its acquisition announcement. Top Arrow executives attended this event to introduce themselves and Arrow, answer questions and assure partners that business would go on as usual, he said.

"That was a great opportunity to be there right away," said Reilly. "It involves a lot of face-to-face communications on the day of the announcement. We're out, continuously talking to customers and suppliers."

Arrow fully expects to integrate some of KeyLink's components into its operations. Declining to name specifics, Reilly did say the distributor usually holds onto some facets of an acquired organization's business structure, such as IT systems, benefits or logistics.

 
 
 
 
 
 
 
 
 
























 
 
 
 
 
 

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