The Board's Role in Betting the Market Cap
April 13, 2017 Published by Kimberly Simpson
Take a moment to place yourself in this board’s shoes. The company has…
- An enviable revenue stream, with approximately $120 million in sales per day and an average sales order of $2,000;
- A strong balance sheet with very little debt;
- A need to react to seismic shifts in customer needs;
- An overweight of assets in Europe while sizable growth for your industry has been predicted in Asia; and
- A market cap of roughly $2.6 billion.
What would your board do?
Would your board be comfortable acquiring a division of a competitor for $2.4 billion in cash and 2.785 million shares of your company’s common stock, representing an approximate seven percent ownership position?
In a “bet the market cap” move, Tech Data Corp. took these actions, acquiring Avnet’s Technology Solutions business in 2017. Technology Solutions partners with more than 40 of the world’s top information technology (IT) vendors to address the IT business needs of 20,000 customers in more than 80 countries, including the Asia Pacific region (a new market for Tech Data). This acquisition makes Tech Data the largest public company headquartered in Florida by revenue, and is expected to catapult the company to a position among the forthcoming 2017 Fortune 100.
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