Financial Analysis and Management of International Groups : Avnet

Topics: Balance sheet, Dividend, Free cash flow Pages: 35 (10428 words) Published: September 18, 2013
ACADEMIC YEAR 2010-2011|



Avnet, Inc., incorporated in New York in 1955, together with its consolidated subsidiaries, is one of the world’s largest industrial distributors, based on sales, of electronic components, enterprise computer and storage products and embedded subsystems. Avnet creates a vital link in the technology supply chain that connects more than 300 of the world’s leading electronic component and computer product manufacturers and software developers with a global customer base of more than 100,000 original equipment manufacturers (“OEMs”), electronic manufacturing services (“EMS”) providers, original design manufacturers (“ODMs”), and value-added resellers (“VARs”). Avnet distributes electronic components, computer products and software as received from its suppliers or with assembly or other value added by Avnet. Additionally, Avnet provides engineering design, materials management and logistics services, system integration and configuration, and supply chain services that can be customized to meet the requirements of both customers and suppliers. Acquisitions

Avnet has historically pursued a strategic acquisition program to grow its geographic and market coverage in world markets for electronic components and computer products and solutions. This program was a significant factor in Avnet becoming one of the largest industrial distributors of such products and services worldwide. Avnet expects to continue to pursue strategic acquisitions as part of its overall growth strategy, with its focus likely directed primarily at smaller targets in markets where the Company is seeking to expand its market presence, increase its scale and scope and/or increase its product or service offerings. On July 6, 2010, subsequent to fiscal 2010, the Company completed its previously announced acquisition of Bell Microproducts Inc. (“Bell”), a value-added distributor of storage and computing technology providing integration and support services to OEMs, VARs, system builders and end users in the US, Canada, EMEA and Latin America. Bell operated both a distribution and single tier reseller business and generated sales of approximately $3.0 billion in calendar 2009, of which 42%, 41% and 17% was generated in North America, EMEA and Latin America, respectively. The consideration for the transaction consisted of $7.00 in cash per share of Bell common stock, which represented an equity value of approximately $252 million, including the accelerated vesting of, and payment in cash for, Bell equity awards of approximately $25 million (which will be expensed in the first quarter of fiscal 2011), and the assumption of approximately $323 million in net debt, thereby resulting in an aggregate transaction value of approximately $575 million. The transaction is expected to be immediately accretive to earnings excluding integration and transaction costs. The Company is integrating Bell into both the EM and TS operating groups and expects cost saving synergies of approximately $50 million to $60 million upon completion of the integration activities, which are anticipated to be completed by the end of fiscal 2011. Characteristics

Market capitalization: $ 4,947.6 million
Total Assets: $ 7,782 million
Number of employees: 14 200
Size: Mid-cap
Stage: Growth company

Financial Statements: refer to Figure 2
a) The company financial performance and recommendation for improvement Analysis
The financial performance of the company over the last past year is presented in Figure 2. Over the five past five year, the average growth rate of the company was 11% whereas the industry growth rate where only 3%. The Gross profit margin is declining since 2008. Consolidated gross profit for fiscal 2010 was $2.28 billion, up $257.2 million, or 12.7%, over the prior year primarily due to the increase in...
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