Why Platinum Equity’s $7.2 billion agreement to acquire Ingram Micro represents a ‘new frontier’ for firm

Platinum officials explain the future and potential of tech industry leader that is firmly entrenched on Fortune 100 list.

Ingram Micro is a global technology leader.

With a business focused on IT distribution, cloud solutions and e-commerce supply chain services, the company produced $47 billion in net revenue for 2019.

With worldwide operations and roughly 35,000 employees, Ingram Micro is firmly entrenched on the Fortune 100 list.

With the consistent and growing need from business and consumers for such products and services, Ingram is poised for future growth.

Those are some of the reasons Platinum Equity‘s deal team worked for months on what would eventually be the largest acquisition in the firm‘s 25-year history.

But any acquisition in the age of COVID-19 with complex issues of regulatory approvals in multiple countries and other potential barriers had to be navigated carefully.

There are few private equity firms with the reputation and resources for such a transaction.

Platinum Equity is in that rare club.

Platinum Equity announced near the end of 2020 that it has entered into an agreement to acquire Ingram Micro Inc. from the HNA group of companies. The transaction with HNA is valued at $7.2 billion. The sale is expected to be completed by the first half of 2021, subject to HNA shareholder and customary regulatory approvals.

“As the largest technology distributor in the world, Ingram Micro is a powerful platform with multiple ways to grow,” Platinum Equity founder and CEO Tom Gores told the Los Angeles Business Journal. “The cloud market is on the threshold of a major expansion, and Ingram will be a vital partner in helping companies respond to high demand for public cloud infrastructure and newer technologies like managed services and hybrid cloud.”

“Coming out of the pandemic, these technologies will be crucial for companies adapting to new workflows and processes. We‘re excited to be a part of that important transformation, and to leverage our operations and M&A toolkits to help Ingram accelerate its growth through these especially fluid times.”

The deal was one of the largest private equity transactions in 2020.

Founded in 1979, the California-based company is the leading global technology distributor, providing both hardware and software to a large base of more than 250,000 customers and partners with more than 2,000 vendors. Partners are a who‘s who of major and specialty hardware and software companies.

Platinum navigated the complexities poised by the pandemic in getting to the finish line, adapting to complete its diligence process and negotiate the required transaction documentation, according to Platinum partner Jacob Kotzubei.

Platinum was able to access the needed capital to add Ingram Micro to its portfolio by leveraging long-term limited partner relationships, reaching beyond traditional networks.

“We were able to reach into the network of investors that we know and then also reach into the network of investors that understand technology that we didn‘t know,” Platinum managing director Matt Louie told PlatinumEquity.com. “And that’s just one example of how we approached things a little bit differently in this deal, because the deal warranted it, given it’s such a large franchise that required a big co-invest. We’ve been able to bring in investors outside of our LP group that we’ve gotten to know through the transaction.”

“This is just a new frontier for us.”

Ingram Micro: A tech giant

Ingram will be an investment sourced for Platinum‘s fifth flagship fund, which closed in early 2020 with $10 billion in capital commitments.

The investment was sought for many reasons:

Ingram is No. 1 when it comes to tech solutions on multiple continents.
Ingram has diversified into high-growth areas through the expansion of its e-commerce fulfillment and cloud-based business units both organically and via mergers and acquisitions over the last decade.
Ingram has robust cash flow profile and has proven to be recession resilient – even during this unprecedented year where economic activity has slowed under the pandemic.
Management has historically driven a strong culture of continuous improvement and has identified numerous future improvement opportunities within the organization, which Platinum Equity‘s global operations resources will look to accelerate in partnership with management in the coming years.

“There’s always challenges running, growing and improving a world-class global organization,” Louie said. “Platinum has proven that we can work within this construct quite well.

“We’re built for this type of opportunity. Navigating the transaction and operational complexities of global businesses is right down the middle of the fairway for us and we’ve been able to prove that we can do it with other deals in the past.”

Platinum has a long track record of executing complex global corporate carve-outs.

Think Vertiv, a leading global provider of equipment and services for datacenters.

Previously, Platinum Equity acquired Emerson Electric‘s Network Power division in a $4 billion deal.

Rebranded as Vertiv, the move was a major success. The company went public earlier this year and trades on the New York Stock Exchange. The transaction marked Platinum‘s largest divestiture to date and the culmination of a successful three-year transformation program following a carve out of the business from Emerson.

Cloud computing is an area where Ingram is an industry leader. The increased use of remote learning for education and the rise of video conferencing in the workplace offers more growth opportunities. The pandemic has fueled reliance on e-commerce, a trend that should continue to gain steam and for which Ingram is well positioned as a leading fulfilment provider.

When the deal is final, expect an aggressive strategy of M&A.

“No other company delivers as broad and deep a spectrum of technology and supply chain services to businesses around the world,” Kotzubei said. “Ingram Micro‘s scale, diverse customer and vendor relationships and track record for innovation, create the perfect platform for us to help accelerate growth, both organically and through additional M&A. It also provides exciting opportunities in several of the fastest-growing sectors in technology as corporations continue to migrate to cloud or hybrid solutions and e-commerce continues to take market share.”