Private equity firm bids $7.3B for IT reseller CDW

CDW is the latest IT company keen to go private, a move that could give the large U.S. computer reseller the freedom to tinker with its business and growth plans without having to spell out those intentions every quarter for investors.

In recent months in deals worth billions of dollars, private equity firms have come to the fore as future homes for technology companies, including electronic payments and commerce specialist First Data and customer information management company Acxiom.

CDW entered into a definitive agreement to be acquired by private-equity investment firm MDP (Madison Dearborn Partners) for $7.3 billion, the companies confirmed late Tuesday.

Subject to shareholder approval and other closing conditions, the parties hope to complete the deal by the end of the third quarter or early in the fourth quarter of this year. Already, Michael Krasny, CDW’s largest stockholder who controls around 22 percent of the company, has agreed to vote his shares in favor of the acquisition, according to John Edwardson, CDW chairman and CEO. Krasny is CDW’s founder and chairman emeritus.

Edwardson said Wednesday that a private-equity group made an unsolicited approach to CDW’s board of directors, leading them to go through an evaluation process with several potential buyers. MDP offered the highest bid for the company. Because that process wasn’t public, CDW will now actively solicit bids from other interested parties to see if they can top MDP’s offer, he added. The so-called “go-shop” period should last 30 days.

“This represents the next chapter for us,” Edwardson said on a Wednesday conference call. “Changes are constant for us.”

CDW resells computers, software, and networking equipment from the likes of Acer, Apple, Cisco, Hewlett-Packard, IBM, Lenovo, Microsoft, Sony, and Symantec to U.S. and Canadian SMBs, governments, schools, and some enterprise customers. CDW does some customization of the technologies it resells and also provides a range of services.

One of the company’s prime competitors is Dell, which has begun to veer away from its direct sales credo, and also other indirect channel players. At the same time, given CDW’s size, smaller resellers may choose to buy equipment and software from the larger player and then provide it to customers.

CDW’s business model has been to compete aggressively on price, according to Leslie Rosenberg, research manager, network channels and alliances at IDC, and she doesn’t expect that to change once the reseller becomes a private entity.

She views CDW’s purchase last year of high-end systems integrator Berbee as an interesting and somewhat puzzling development. CDW has yet to integrate Berbee into its operations, keeping it more as a separate operation, and Rosenberg wonders what the reseller’s long-term plans are for that business.

MDP is committed to CDW’s existing strategies, Edwardson said. In an 8-K report filed with the U.S. Securities and Exchange Commission on Wednesday, CDW included a coworker FAQ, which listed some of those objectives, notably becoming a $10 billion company in revenue by 2008 and extending the Berbee business on a national scale.

Once the deal is final, MDP intends to keep the current CDW management team intact, Edwardson said. “I plan to stick around,” he wrote in a Tuesday e-mail message to CDW staff.

Founded in 1984, CDW went public in 1993. The company employs over 5,600 staff and reported revenue of $6.8 billion in 2006. Edwardson doesn’t expect any job reductions once CDW becomes a private company.