Ingram Micro's AVAD Proposition
It's a sweetheart of a deal for AVAD's founders, but is the rest of the industry feeling the love?
By Janet Pinkerton
Ingram Micro's purchase of AVAD, a deal completed July 21, has evoked a curious mix of industry awe and dread—awe for the manufacturers' reps who created the distribution group and sold it for big bucks, and dread for what an Ingram Micro-owned AVAD might do to specialty A/V margins and the overall custom retail business.
The business questions surrounding this deal focus on what vendors will do now that AVAD is owned and capitalized by Ingram Micro, the enormous IT distributor that is one of the biggest fishes in the technology pond. How will vendors using AVAD impact brick-and-mortar custom retailers? How will the C-tailer compete with the AVAD-supported installer who sells equipment at cost and offers labor on the cheap?
These questions have always been at the forefront when it comes to AVAD, a stunning success story that nevertheless has already generated its fair share of anxiety and controversy for many C-tailers. Adding Ingram, the 800-pound gorilla, to the AVAD equation notches those anxiety and controversy levels up quite a bit.
Getting past the competitive dynamics at work, there's the human question of whether the former AVAD owners can keep their entrepreneurial drive alive under the Ingram Micro corporate umbrella. Will they stick with it, huge financial carrots notwithstanding?
WHAT'S THE DEAL?
Ingram Micro has been making noise about boosting its presence in the CE/custom install space for well over a year. While the behemoth made some progress in that regard, its stunning purchase of AVAD immediately plugs it directly into the burgeoning home technology integration market.
For the AVAD owners, meanwhile, the deal is sweet reward and validation. Each receives a pro-rated share of Ingram's initial $120 million payment and is eligible for a share of up to $80 million over the next three years if performance goals are met. In 2010, the owners could share an additional $100 million if "extraordinary performance levels" are reached over a five-year period. All AVAD founders will continue as principals of their respective rep companies.