Welcoming Tech Data to the Apollo Family

I wanted to share a few things that we think are notable about this deal, particularly in the current economic environment that we all continue to navigate:  

• Balance Sheet Strength and Low Leverage – Tech Data’s strong pro forma balance sheet will give the company significant financial flexibility and carries only about 2.5x leverage, much lower than what many may expect. We deliberately created a conservative capital structure and knew from experience in this sector the strategic advantages that can accompany it. Apollo typically applies lower leverage than our peers, with Fund VIII’s portfolio companies averaging 3.6x leverage, as we seek to create long-term value through growth, cash flow generation and better business performance.
• Significant Equity Investment and Unique Financing Structure – Along with Apollo’s $3.75 billion equity investment, a key part of our financing structure was a broadly syndicated $5.0 billion ABL facility, in which assets spanned 21 countries. It is one of the largest ABLs ever raised, giving investors attractive yields and a first lien on high quality assets. Tech Data in turn has nearly $3 billion of day-one liquidity, with strategic and financial flexibility to invest in the business and drive long-term value. Being able to creatively structure and execute unique deals of this kind is critical, especially in our current market environment.
• A Strong, Private-Backed Relationship – Ask Tech Data about becoming an Apollo-backed company, and CEO Rich Hume will talk about two things – focus and strategic support. The company today announced plans to invest approximately $750 million in digital transformation initiatives over the next five years to accelerate innovation in ways that will deliver improved experiences and greater agility for businesses across the technology ecosystem. With our new relationship, stock price volatility and short-term quarterly demands will not be a distraction in executing it. They have our full support in delivering on the plan and evaluating strategic transactions and initiatives. Collectively, we feel confident in our long-term view of success.

This deal wasn’t an easy close. Material adverse change clauses (MACs) are increasingly being used to call off M&A in the current market. As is often the case with our team, we had to think big to get this done, and our ability to employ a creative, new structure speaks to the way we invest at Apollo and is indicative of our role as a long-term investor with a buy and build strategy.

On behalf of our entire executive team, I am so proud of our colleagues that identified this opportunity and executed it in an incredibly challenging market environment. We know this will be a great investment for our pension fund clients and other LPs and we are very excited for what our combined future holds.