The long-predicted consolidation of the UK’s mobile distribution landscape moved a step closer last week with the announcement of Ingram Micro’s $840m (£535.7m) acquisition of BrightPoint.
The global deal, expected to be completed by the end of this year after shareholders have given it their blessing, provides Ingram Micro with a much-coveted foothold in the global mobility market.It is also seen as crucial to the IT distribution giant as smartphone and tablet sales continue to challenge the PC market. Ingram Micro CEO Alain Monié made this much clear when he announced the deal. He said: ‘Expanding our presence in the mobility market has been a focus of Ingram Micro and the acquisition of BrightPoint accomplishes this to an extent that would have been challenging to achieve on our own.’
Monié’s views on how difficult it has been for Ingram Micro to break into the mobile market certainly chime with its UK division’s experience in this country. Despite winning the coveted Nokia b2b contract last year, industry sources say it has gained little traction. With BrightPoint now on-board, powered by Ingram Micro’s deep pockets, the combination could be unstoppable. One distribution source told Mobile: ‘This deal has huge implications. It’s all about size. It gives Ingram Micro the consumer space it desires. It has the money, and now it has BrightPoint. It is very aggressive.’
Another industry source pointed to the sheer financial strength of the distributor. He said: ‘Ingram Micro has revenues of over $30bn. Wireless and telecoms is a category Ingram has to play in so it will buy themselves in. It is prepared to do big things to get into that category.’
Monié is seen as a driving force behind the company’s expansion into mobile. One MD commented: ‘Monié came back to Ingram Micro with a very aggressive growth agenda. I am sure he has other acquisitions on the cards.’
Some predicted that BrightPoint would soon be on the acquisition trail in the UK, which is seen as ripe for consolidation. Just last year Brightstar made a play for Data Select and there have been suggestions that 20:20 Mobile could potentially be up for sale. One distribution source said: ‘Ingram Micro wants growth. One way to do that is to buy up other mobile distributors, [which is] something BrightPoint can do, now they have the financial clout of Ingram Micro behind them…There is obviously room for consolidation in the UK market and that consolidation is only a matter of time.’
Most dismissed the prospect of BrightPoint merging with Ingram Micro. One director said: ‘There would be absolutely no benefit to either of integration. They are two separate businesses with two separate customers in the UK.’
Some saw the acquisition as a response to Brightstar’s joint venture with Tech Data. One CEO said: ‘It is a direct reaction to the success of the Brightstar/Tech Data joint venture and a tribute to its success in the European market. The joint venture has made a lot of money from convergence. Now Ingram Micro wants to do the same and BrightPoint is the right fit. They have similar cultures placing a lot of importance on long-term partnerships.’
Rivals are already planning to consolidate their position in the market and many will see the forthcoming transition period as an opportunity to grab share from both BrightPoint and Ingram Micro. ‘Rivals will waste no time in talking to [BrightPoint’s] partners, vendors and retailers in the early days when there could be some disruption and some inertia as they make the transition. They will have to act quickly, because once they are up and running they will be a formidable challenge,’ said one logistics source.
How long that transition period lasts will depend on what Ingram Micro plans for BrightPoint Europe. Certainly on a global scale the deal is expected to deliver more than $55m (£35.5m)in annual cost synergies and efficiencies by 2014, according to Ingram Micro.Both companies declined to discuss whether there could be redundancies in the UK. However, one distribution director believes some cuts are inevitable, particularly where there is overlap. He said: ‘It may make sense for them to combine their warehouse and logistics businesses to create an economy of scale [and] lowering the cost of their routes to market.
‘But if they want to keep their vendors and resellers happy it is imperative they keep their front offices. That means keeping BrightPoint’s category management expertise strong. That will be the primary concern of vendors.’
BrightPoint is expected to start headhunting talent, with rivals predicting an aggressive recruitment drive, as well as a focus on new customers in the mobile market. One distribution source warned: ‘They will definitely be looking to headhunt the best people they can get because they will be looking to get as many new customers as they can. And they have the financial muscle to do that. This really is a game-changer.’