"Coming together is a beginning; keeping together is a progress; working together is a success."
-Henry Ford
August 03,2015
CDW Announces Completed Acquisition of Kelway
martinwolf Transaction Analysis
Financial Information*
- Total Transaction Size: $431M
- Implied Enterprise Value: $597.8M
- EV/FY15 Revenue: 0.64x
Transaction Facts
- CDW announced during its earnings call today that it completed its acquisition of UK-based solution provider Kelway, after initially acquiring a 35 percent stake in November 2014.
- The consideration will be paid in cash and stock, and will consolidate $80 million of Kelway net debt.
- CDW decided to exercise its option to complete the acquisition after its success since last November, and as recently as June previewed its thinking that Kelway could serve as an international platform to better serve CDW’s multinational customers.
King of the Hill
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Culture is Key to Success: In the announcement, CDW Chairman and CEO Tom Richards credited the companies’ “well-aligned cultures” for their successful relationship. Given the difficulty and delicacy of corporate integration, cultural fit is critical for ensuring a smooth integration.
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Leading Growth: CDW reported revenue up 6.7 percent year over year to $3.31 billion, with net income up $108.2 million in the same period. Its peers in the IT Direct Marketers segment, as tracked by the martinwolf Scoreboard, have a median revenue growth rate of 2.8 percent. This acquisition allows the company to preserve its significant growth by serving new opportunities abroad. In the announcement, Richards stated that CDW is continuing “to target profitable growth in 2015 and organic growth 200 to 300 basis points above the US IT market.”
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Reach and Grasp: The complete acquisition adds to CDW’s portfolio a $900M+ revenue solution provider with in-range profitability. Together, CDW and Kelway serve more than 250,000 customers based in the US, Canada and the UK with operations in more than 80 countries. With scale as a key differentiating factor among IT Supply Chain companies, CDW is continuing to differentiate itself.
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Higher Performance, Higher Price: In CDW’s Q4 2014 earnings call, the company revealed that its 2014 partial acquisition of Kelway cost $86.8 million. However, it also cautioned investors that the cost of a future transaction would likely be higher thanks to improving performance and debt pay down.
For more information about this transaction, click here to read the press release.
*Kelway FY15 Revenue from Kelway Company Profile. Implied Enterprise Value calculated as follows: $431M cash and stock, $80M of Kelway net debt, $86.8M for initial CDW investment.
martinwolf was not the advisor in this transaction.
