It pays to be CDW Corp. The computer reseller, which in April reported a 24.5% rise in first-quarter net income, announced on May 30 that it has agreed to be bought by private equity firm Madison Dearborn Partners for approximately $7.3 billion.
CDW shareholders will receive $87.75 in cash for each common share, which represents a premium of about 16% over the computer reseller’s closing share price of $75.56 on May 25, the last trading day prior to published reports regarding a potential transaction.
The $6.785 billion CDW was an attractive target. The Vernon Hills, IL-based company recently expanded its distribution capacity, reorganized its sales force, and via its September purchase of $390 million Berbee Information Networks Corp. expanded its IT services offerings.
Still, “Madison Dearborn isn’t your typical rollup shop,” says Mark Amtower, founder of Amtower & Co., a Highland, MD-based consultancy that helps direct marketers sell to the federal government. Madison Dearborn, which last year acquired scented candles manufacturer/marketer Yankee Candle Co. for $1.4 billion, usually seeks out “growing companies that can grow more and dominate, leaving management in place while not looking for immediate profits by a slash-and-burn approach,” Amtower says.
Amtower, who consulted with CDW for the past few years, believes the deal could help accelerate the computer marketer’s growth. “Dearborn has a stable of well-run properties,” he says. “If they leave CDW alone, it would free up the folks there not to worry abut quarterly results on Wall Street and really start planning for the long term. CDW could be poised to go on a tear.”
What’s more, Madison Dearborn has deep pockets, so “CDW can aggressively look for other acquisition targets,” Amtower adds. “I had a conversation with a CDW executive and he’s happy he’s staying in.” As long as Madison Dearborn remains in the picture, CDW’s future looks bright, he says. “Now the fly in the ointment is that they’re on the table and they will look at other offers,” which could mean a buyer looking for an aggressive return on investment. “I hope Madison stays in the game,” he says.