Arrow Electronics Inc. of Melville, N.Y. has acquired Mississauga, Ont.-based value added distributor SkyData Corp. for an undisclosed sum.
The acquisition fee was characterized by Howard Goldberg, president of SkyData, to be in the millions.
The deal was inked last Thursday but announced Wednesday, and is expected to pass U.S. regulatory approvals and close within two weeks, Goldberg said.
No layoffs are expected at Skydata, and the company will be able to retain its name. The company celebrated 10 years in business last year and posted more than $43 million in sales. It has sales offices in Ottawa, Calgary and Laval, Que. Skydata is also EMC Corp.’s largest distribution partner in Canada. Arrow has also been a long time partner of EMC, but that wasn’t why this deal took place, according to Goldberg.
“We’ve been approached over the last number of years by several distributors. The commercial guys, the broadliners, the so-called value-add guys in acquiring our business and it was relatively easy to understand the level of interest,” he said.
Acquisition discussions started, by Arrow, back in December of 2004. For Goldberg the deal hinged on remuneration, that all Skydata staff be retained and that the company’s business model would stay in place.
“We evaluated our position in the market place, prospects for the future, and the risk with our on going enterprise and in the final analysis we determined that the Arrow proposition would ensure that our business would not only prosper, in my estimation, but flourish in the coming years,” Goldberg said.
For Arrow, acquiring SkyData was an opportunity to expand its business even further in Canada. According to Ed Coleman, president of Arrow. Canada is the fastest growing region for the distributor in North America.
“We have a great relationship with EMC and this is an opportunity to deepen that relationship and SkyData has a reputation of being a high value add distributor. I like their solutions focus and how they go to market,” Coleman said.
Skydata will continue to operate separately from Arrow. Goldberg will continue running the company, which, besides EMC, distributes Sony, QLogic, Adic, Brocade, Emulex and Quantum.
Arrow does have an office in Canada, located in Mississauga. Goldberg will now report to Arrow Canada president Robert Boulet, who once ran GE Capital.
Goldberg pointed out that it will be “business as usual,” except to say that Arrow will be adding more resources to the company in areas such as marketing, financial resources, and electronic delivery systems.
“Arrow is a US$12 billion organization and they have depth in every disipline,” he said.
From Arrow’s point of view, Goldberg believes they wanted the on going revenue streams of Skydata, which will be incremental to their business.
Arrow Canada, similar to Arrow in the U.S., has specific business units for each vendor it represents. For example, there is a dedicated team for HP, IBM, Sun and Network Appliance. SkyData will function as EMC’s business division in Canada, Coleman said.
In addition, Goldberg added that Arrow also wanted insight to Skydata’s business model.
“They get to know how we do it and it is significant from any other distributor,” he said.
In a previous interview, Goldberg said Skydata’s difference was focusing on the mid-range and enterprise storage markets. Another key was to maintain few vendor partnerships instead of having huge line cards.
Coleman added, it is his belief that distribution is in the midst of a shift to a higher value add and higher touch solution oriented model.
“For resellers to be successful (in the future) they have to shift from representing hardware in the market place and broaden their capabilities on solutions such as compliance and information lifecycle management. They must combine hardware, software and services and some VARs have that capability and other don’t. The SkyData model plugs the gap for those VARs who do not have the capabilities to bring the complete solution to the customer,” Coleman said.
SkyData will be integrated into Arrow Canada, which also has an office in Quebec City. “They are a part of Arrow now, but I wanted (SkyData) to maintain a sense of identity and I hope to add some new ideas and thoughts to enhance them,” Coleman said.
Boulet said that this acquisition would help Arrow Canada become an extension of the vendor to the reseller community. “We will work with SkyData and with the EMC business unit in the U.S. to provide a suite of solutions and marketing programs,” Boulet said.
Skydata has no plans to relocate.