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How a secret sauce spiced Dicker Data's A$68M buyout of Exeed

How a secret sauce spiced Dicker Data's A$68M buyout of Exeed

Dicker Data and Exeed were not just complementary in terms of geography and key accounts.

Justin Tye (Exeed)

Justin Tye (Exeed)

Credit: IDG

There was a kind of inevitability about Dicker Data's A$68M cash buyout of New Zealand distributor Exeed, announced at the end of July.

Chatter had built about such a deal for months, even years, and Australia's Dicker Data always seemed the most eligible of suitors. 

Both companies were locally founded as challengers to giant multinationals such as Ingram Micro, Westcon Group and Synnex. Both worked across the A/NZ region, but had built particularly strong businesses in their respective home geographies.

Exeed, which since its inception in 2002 had built a particularly strong partnership with vendor giant HP, brought something else to the table, however: a secret sauce of skills, experience and capabilities in serving the retail channel.

Distribution is a challenging business, requiring strong systems and processes to manage customer logistics and to eek out a profit off high volumes on narrow margins. With annual sales of NZ$380 million across A/NZ, for instance, Exeed's EBITDA was $15 million.

The combined Dicker Data and Exeed New Zealand businesses is expected to generate around $500 million in revenue, making it a strong number two to Ingram Micro NZ, which  in the year ended 31 December, 2020 just cracked the $700 million revenue mark.

ICT distributor market share A/NZCredit: Dicker Data
ICT distributor market share A/NZ

In addition, to Exeed's NZ stronghold, Dicker Data gained its Australian business, which generated around $70 million in revenue annually.

With 119 staff (95 in New Zealand and 24 in Australia) and 1200 New Zealand reseller partners at acquisition time, Exeed boasted other vendor alliances including majors such as Apple, HPE and Microsoft as well as Motorola, Ruckus and Webroot.

As attractive as that package was, it was Exeed's retail distribution nous that took the deal over the line.

"Our acquisition of the Exeed Group grows our presence in New Zealand and brings expertise in servicing the retail segment, a market Dicker Data has not traditionally participated in," Dicker Data told shareholders when reporting its half year results in August.

Dicker Data's success had been anchored in the corporate and commercial markets, but Exeed delivered smarts in how to "profitably service retailers with a mix of traditional and non-traditional IT products".

"The retail market represents a multi-billion-dollar revenue opportunity for the company and will be an area of focus in 2021 and beyond," Dicker Data's report declared. "Many of the company's existing vendor line-up have large established retail businesses that Dicker Data is well positioned to capitalise on."

So what is the secret sauce of retail distribution? Exeed's managing director, Justin Tye, will run the newly combined New Zealand businesses.

Exeed delivered complementary additions to Dicker Data's commercial business that were largely "net new", he told Reseller News. The only real client overlap between the two was Microsoft. However, the "genuine" net new came out of Exeed's retail operations.

"Dicker doesn't have a retail business and one of the attractions was it brings in quite a range of new agencies that are obviously attached to a more retail centric environment -- Apple being one good example," Tye said.

Exeed's retail business further complemented the commercial business because the retail season was when the commercial business tended to be low in volume. 

"It provides a better revenue continuity throughout the year and smooths some of those dips and spikes you might expect in a business that is fully commercially-centric."

The skillsets required to service retail customers were also quite different, with retail being more of a planned and scheduled activity. 

"The large retailers we work with, Noel Leeming and Harvey Norman and so on, are very structured in the way they plan for promotional activity," Tye said. "Account management and engagement is really centred around that."

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Tags retailSynnexIngram MicroDicker DataWestcon GroupdistributioneXeed

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