Add Tech Data to the list of technology companies falling into the sights of private equity firms in the hunt for sound investments. Apollo Global Investments is offering $5 billion for the world’s second-largest technology distributor.
The Lowdown: According to Reuters, Apollo made the unsolicited offer to the management of Tech Data, which is currently riding an all-time high stock valuation as it continues to expand its cloud service offerings and global footprint. Neither Tech Data nor Apollo is commenting on the report, and the sources at Reuters say there’s no guarantee that a deal will happen.
The Details: Apollo is reportedly offering a premium price of $130 per share for Tech Data, which would cover the distributor’s current market capitalization value and the $1.3 billion in debt.
The Impact: It’s likely that little will happen to Tech Data or its operations if acquired by Apollo or any other private equity firm — at least in the short run. Because Tech Data operates on slim margins, private equity ownership could cause it to seek ways to cut costs and shore up its profitability.
Background: Tech Data is only the latest technology firm to earn the attention of private equity firms. Rival Ingram Micro was bought by Chinese conglomerate HNA Group. In December, Apollo expressed interest in buying Ingram from HNA. Reports started circulating in August that RRJ, a Hong Kong-based investment firm, was interested in acquiring Ingram from HNA. Private equity firms have been snapping up technology companies of late, seeing them as sound investments amid concerns of a general economic slowdown.
Apollo is no stranger to the technology industry. In its current portfolio are companies such as Presidio, Rackspace, and Charter Communications.
