Channel Insider content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.

Distributor Ingram Micro Inc. will pay up to $200 million for a consortium of 12 distributors that sell home-automation products for custom installations.

The acquisition of AVAD Distributors will allow Ingram Micro, of Santa Ana, Calif., the world’s largest IT products distributor, to deeply entrench itself in the fast-growing home technology integration market.

AVAD last year reported revenue of $200 million from sales of such well-known brands of home-automation products as Fujitsu, Bose, Sharp and Samsung to a network of about 8,000 integrators. AVAD sales have increased at rate of 35 percent since 2002, according to the company.

The acquisition, say Ingram Micro executives, advances the $25 billion company’s strategy to invest in new markets.

“We view this as an opportunity to further differentiate Ingram Micro and enter a profitable and growing new market,” said CEO Greg Spierkel.

AVAD will retain its name and operate as an Ingram Micro subsidiary, run from an office in Van Nuys, Calif., said Keith Bradley, president of Ingram Micro North America. AVAD President Bob Gartland will retain his post.

“Their entire management team is going to continue with us,” Bradley said. “I am going to be reasonably involved. Bob is going to be reporting directly to myself.”

Ingram Micro will support AVAD in functions such as finance, human resources and information systems, but customer-facing activities such as sales, marketing, purchasing, technical support and showroom facilities will remain as they are.

“We have been basically 12 companies that were separate legal entities that banded together and formed a marketing company called AVAD,” Gartland said.

Even though from a marketing standpoint the companies acted as one, it was becoming difficult to manage and grow the business as it existed. As AVAD grew, Gartland said, management realized it needed to merge the businesses, which is now occurring with the acquisition by Ingram Micro.

With capital and support from its multibillion-dollar parent, AVAD can act on its expansion plans, Gartland said.

Bradley said minimal overlap exists between AVAD and Ingram Micro’s existing consumer electronics business, which will continue operating as part of Ingram Micro.

AVAD distributes products from 28 locations throughout the country that include product showrooms, warehouses and training facilities. Bradley said Ingram Micro has no plans to consolidate the locations, and, if anything, the business will expand.

Having local branches is important in the home-automation market because much of the business is conducted through will call, rather than box shipping, Bradley said.

Home-automation integrators, who handle everything from home-theater systems to computer-controlled lighting and central vacuuming, drive 50 or 75 miles to will-call centers to pick up the products they need for their projects, Bradley said.

“They don’t want a $10,000 plasma TV showing up at the doorstep,” he said.

The AVAD acquisition is a cash transaction that Ingram Micro expects will add to the company’s earnings this year and next. Completion of the transaction is scheduled for later this month.

The purchase price includes an initial payment of $120 million, subject to a final determination of net asset value, and earn-out payments of up to $80 million over the next three years, conditional on performance. Additional payments are possible in 2010 if extraordinary performance levels are achieved over a five-year period.

Ingram Micro will not acquire AVAD’s cash on hand, long-term debt or other business liabilities. The distributor is funding the purchase from its existing borrowing capacity and cash, and the acquisition will have no material impact on Ingram Micro’s ability to meet compliance requirements under its financing agreements, the company said.

Gartland said the acquisition is great news for AVAD’s employees, affiliates, customers and manufacturer partners.