Avnet CEO: global expansion an 'imperative.'

Electronic News, Nov 30, 1992

GARDEN CITY, N.Y.--Global expansion for U.S. industrial distributors is not a matter of choice but of necessity, according to Avnet chairman and CEO Leon Machiz.

In recent years, Avnet has been pursuing "a global strategy born out of suppliers' needs to be global, and we have that imperative to address," Mr. Machiz recently told shareholders here. "The fact of the matter is that we believe more growth will issue from our global operations than from our domestic ones."

Accordingly, Avnet has acquired three European distributors over the last 18 months: Access Group in the U.K., FHTec in France and Nortec AB in the Scandinavian countries. The U.S. firm recently agreed in principle to buy the components distribution business of Electronic 2000 AG based in Munich, and also is "actively pursuing a potential acquisition in Italy," Mr. Machiz noted.

He reiterated the company's intention to have distribution operations in all major North American, European and Asian markets. Avnet is deliberately heeding "the demand by our suppliers that we be global. The demand is tacit; they don't come to us and say 'Do it or else," Mr. Machiz said. But he added "More and more customers as well as suppliers are global. Suppliers want distributors who can give them that global penetration."

By way of analogy, Mr. Machiz told shareholders "Some of you may recall the initial resistance to those U.S. distributors who sought national market penetration." It was "considered unlikely" that nationals could offer service equivalent to what dedicated regionals or locals provided, "but this belief proved to be unfounded." The nationals prospered by achieving economies of scale. "Before long, many local distributors fell by the wayside."

He continued "We believe that there will be many, many years of catching up by other distributors" once they come to the realization that "if they want to garner market share and increase their presence, they're going to have to go global."

The Avnet executive said the acquired European operations "will play a key role in our future profitability and growth" despite the current market slowdown there. "There is no question that the European recession is deepening. It's largely driven by stresses and strains caused by restriction in Germany on their interest rates," Mr. Machiz said. He noted, though, the "deepening slump" is forcing European acquisition candidates to "become more realistic about the price they're asking."

Summing up, he stated "Our strategy is born out of an honest, hard appraisal of our people, of our capability, of our capital. And we really have the right to say 'Today the United States, tomorrow the world."'