Avnet is the largest electronics distributor in the U.S. It’s become that way primarily through acquisitions. Roy Vallee, who oversaw much of the distributor’s growth from $2 billion in 1992 to $26 billion now, told MDM in Lessons from Avnet’s Rapid Growth that distributors should consider three critical factors before making an acquisition: culture, strategy and economics.
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The first piece is culture. “If the company you’re acquiring doesn’t share your values or your morals, then I think it’s a business you should stay away from,” Vallee said.
The next, strategy, is focused specifically on building out a plan for integration. “I think one of the big problems is that oftentimes, companies don’t actually figure out the integration strategy until after the acquisition is completed,” he said.
And finally, given the right culture and a strong strategy, distributors should consider economics. “The question is, ‘Is there an appropriate return on the capital that we’re going to employ here when we get done with the integration?’” he said. “If not, then we should not do the deal.”
Brent Grover, author of The Little Black Book of Strategic Planning for Distributors, recommends using an Acquisitions Filter to launch a successful acquisitions program. This, he said, prevents wasting time on targets that don’t fit into your strategic plan. Criteria can include sales revenue, cultural fit, profitability, product lines, ERP system, real estate and others.