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MDM Interview, Part 1: Lessons from Avnet's Rapid Growth

Roy Vallee on being at helm of a distributor that grew from $2B to $26B

October 10, 2012
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Part 1 of this interview is being provided free exclusively to readers of NAW Smartbrief. This interview was originally published in the Oct. 10, 2012, issue of MDM Premium, Modern Distribution Management's twice-monthly subscription newsletter for wholesale distribution executives. Learn more about MDM.

In November, Roy Vallee, executive chairman of electronics distributor Avnet (NYSE: AVT), will retire after 35 years with the company. He served as president and COO from 1992 until 1998, when he was promoted to CEO – a position he held until July 2011. During his tenure, Vallee saw Avnet grow from a $2 billion company to a $26 billion company. Vallee recently spoke with Associate Editor Jenel Stelton-Holtmeier about his career at Avnet and the role acquisitions played in the success of the distributor.

In part 2, in the Oct. 25, 2012, issue of MDM Premium, Vallee discusses how the industry has changed over the past 35 years, where he thinks it’s heading and provides advice for the next generation entering the industry.

Read Part 2 of this interview: Roy Vallee Reflects on Changes in the Industry

MDM: Avnet’s growth is in large part attributed to its acquisition strategy. But integration can sometimes be a challenge – finding a balance between maintaining the culture and what attracted Avnet to the company while at the same time making the acquired company a part of Avnet. How did Avnet achieve success with this? And how can other companies make it a smoother process?

Roy Vallee: We did our first large-scale integration back in 1993. And we had to figure out then the best way to deal with it. But one of the first things we decided was that we’d document the process that we used so that with our next acquisition, we could pull out that documentation and use it as a framework.

Then we updated it based on what we learned in that integration. The more integrations we did, the more robust and capable our documentation became. In other words, we learned. We got older and wiser instead of just getting older.

In terms of some more specific advice or a framework, we approached it by forming teams. The way we looked at our integration, we broke it down around functions such as logistics, IT, HR, sales, marketing, etc. And we formed teams around those functions. What we did that I think a lot of companies don’t necessarily do is, we put members from both companies on those teams. So we were getting a 360-degree view of the areas that needed attention, the decision points.

Those teams made recommendations to management on how to proceed with the integration of their area. And then management, of course, provided oversight, and that’s how we rolled out the integrations.

The other thing I would say is if you don’t think you’re over-communicating, you’re not communicating enough. We hit employees with town hall meetings, with email communications, with video conferences, with hotlines where they can pose questions, with FAQs, with answers. We communicated substantially, and the bigger the transaction, the more we communicated. I think that’s very important in terms of galvanizing the new team.

The last one I’ll mention in terms of big things is the importance of speed. During the integration process, a lot of folks on both sides – the acquirer and the acquiree – will be unsettled to some extent. They’re not sure what their role will be, who their boss is going to be, how the strategy might change, what’s going to happen to the culture, etc. The sooner they know the answers to all of that, the sooner they can settle down and get back to work.

Somebody gave me a very vivid mental picture a while back. When a company is focused on its internal issues, and everyone is looking inside, what part of our anatomy do you think our trading partners are seeing? The key is to get all the inside stuff resolved as quickly as possible so that our teams can focus on the outside – facing  our trading partners and dealing with their issues and opportunities as opposed to ours. So speed of execution is very critical in terms of successful integrations.

MDM: What does Avnet look for in companies it wants to acquire?

Vallee: Acquiring the right business in the right way is the starting point. No matter how good the integration strategy is, if you bought the wrong business, or you bought a company under the wrong circumstances, the integration’s not going to be able to fix that.

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