Redington Gulf in acquisition talks
Distributor sets sights on strengthening its business
Redington Gulf could begin making use of the funds it gained from an injection of private equity into the firm last year after signing non-disclosure agreements with at least two unnamed companies that it is seeking to buy.
The distributor sold a stake in its business for US$98m to Investcorp last October, culminating in the Bahrain-based investment firm vowing to help it implement the next stage of its corporate strategy by assisting with add-on acquisitions, financial relationships and balance sheet optimisation.
Although a lack of M&A activity since that announcement was made has prompted speculation that Redington Gulf’s acquisition plans may have been put on hold, CEO Raj Shankar insists the company’s appetite for expansion remains strong.
He confirmed that talks are ongoing with a couple of potential targets that would put Redington into a “different orbit” if a successful outcome is reached, but stressed that the distributor was under no pressure to strike a quick deal.
“If you have seen the way that Redington behaves — the brands that we engage with — we are pretty picky and there is a lot of thought process behind it,” he said. “Similarly, when we do an acquisition we are extremely choosy and I strongly believe in what Warren Buffet says, ‘don’t buy a company just because it comes to you cheap.’”
Although declining to reveal the geographic coverage or brand focus of the companies it is in discussions with for confidentiality reasons, Shankar insists the HP, Nokia and Samsung supplier’s main priority with any acquisition is to ensure it “creates shareholder value”.
While he suggests aspects such as pricing, valuation and timing may explain Redington’s failure to close any deals up to now, Shankar remains confident that the company will eventually come to an arrangement with at least one of its targets.
“The way we are approaching things it should happen, but these are companies which have had a good standing so naturally things don’t happen quickly because nobody is in a hurry,” he explained. “It comes back to that earlier point — if somebody was desperate to divest or sell it makes the consummation so much easier, but when you have to draw somebody to the table, create a value proposition and make it interesting, the whole negotiation is a little different. Suffice to say, there are some opportunities and in my opinion the chances of consummation are good so I am still looking at it pretty positively.”
India-listed Redington trades with more than 2,000 resellers across the region and boasts a string of offices throughout the Middle East and East Africa. Last year it generated more than US$1 billion in MEA sales.