"I cannot give you the formula for success, but I can give you the formula for failure -- It is: Try to please everybody."
-Herbert Bayard Swope
June 24,2019
Insight Enterprises to Acquire PCM Inc in Public-to-Public Transaction
martinwolf Transaction Analysis
*Financial Information
- Transaction Value: $537.88M
- EV/Revenue: 0.25x
- EV/EBITDA: 9.35x
Transaction Facts
- Global IT solutions provider Insight Enterprises (NASDAQ: NSIT) announced early today its plan to acquire PCM Inc. (NASDAQ: PCMI) for $35 per share, a 43.6 percent one-day premium over its share price Friday, June 21.
- PCM has 40 office locations and over 4,000 employees, with half in client-facing roles in sales, technical and service delivery roles. This will increase Insight’s footprint in North America and the UK.
- According to the press release, Insight expects to realize annual run-rate cost synergies of approximately $70 million by the end of 2021. It also expects the acquisition to add more than $0.70 EPS in 2020.
- The transaction is expected to close in the second half of 2019 subject to customary closing conditions.
martinwolf Analysis
- Handful of Winners: This acquisition is significant and makes Insight one of the handful of major solution providers in North America. Most notably based on the size, scale, management and talent, solution provider winners are Insight, WWT, CDW, SHI, Presidio and Computacenter. While Computacenter is the smallest of these North American companies with $1B in US revenue following its acquisition of FusionStorm in October 2018 (martinwolf advised Computacenter on this deal), it is a $5B player in Europe and a growing force in North America.
- What it Means for Insight: Insight becomes more valuable to its vendors because it’s easier to manage the channel and there’s less credit risk. Insight will also have more influence over vendors because it’s now a bigger part of the vendor’s business. There is also a significant benefit for Insight’s end users because of this combination. End users will benefit from better pricing, better availability, and better access to vendors’ management. End users will be able to better understand the technology road-map because their solution provider is now larger and more important.
- History of Successful Integrations: This deal comes 17 months after Insight’s acquisition of Datalink (martinwolf advised Insight on this deal). As Marty Wolf explained to CRN, the $258 million deal strengthened Insight’s data center services offerings around hybrid cloud, converged and hyper-converged infrastructure, and is a testament to Insight’s CEO Ken Lamneck’s ability to integrate large disparate companies. This history of managing dis-synergies will help Lamneck integrate PCM with Insight.
- What’s Next for Mid-Sized VARs: Mid-size VARs will need to find a new home; the pace of musical chairs has accelerated with this announcement.
For more information about this transaction, click here to read the press release.
*Financial information from Factset and the Insight press release.
martinwolf was not the advisor in this transaction.
