Synnex Corp. and Tech Data Corp., two top distributors of information technology products, today announced that they’ve inked a $7.2 billion agreement to merge into a single company.

The combined firm is expected to have pro forma revenues of about $57 billion. Synnex and Tech Data’s combined pro forma profits, in turn, will amount to approximately $1.5 billion on an adjusted basis not including interest, taxes, depreciation and amortization.

As two of the industry’s largest IT distributors, Synnex and Tech Data play a central role in the enterprise technology supply chain. They act as intermediaries between companies that develop technology products and the resellers and system integrators that ultimately sell those technology products to enterprises. Besides providing resellers and system integrators with access to suppliers’ latest offerings, IT distributors also offer them assistance in areas ranging from preparing marketing materials to accounting.

IT distributors have maintained their key role in the supply chain with the emergence of the public cloud. Synnex and Tech Data both have alliances with the major infrastructure-as-a-service providers that they use to provide various cloud-specific offerings. Tech Data, for instance, offers Amazon Web Services Inc. partners services such as billing assistance along with technical resources they can use in client projects.

The IT distribution channel is big business: Synnex and Tech Data are both members of the Fortune 500. With its expected $57 billion in revenues, the new company that will emerge from the merger is expected to be the world’s largest IT distributor by sales and will have a solution catalog of more than 200,000 offerings. 

Moreover, it’s expected to be more profitable. According to estimates from Synnex and Tech Data, the combined firm will log a 25% accretion in its adjusted diluted earnings per share a year after the deal’s closing. 

Part of the profitability increase is set to come from $100 million in operating cost reductions that the combined firm is projected to realize in its first year. Those savings will grow to at least $200 million in the second year after the transaction’s completion, Synnex and Tech Data’s projections indicate. 

The deal is set to close in the second half of this year. Afterwards, Synnex shareholders will control approximately 55% of the combined firm and the rest will be owned by private equity firm Apollo Global Management, the owner of Tech Data. The combined firm will be led by Tech Data Chief Executive Rich Hume. 

The company will “benefit from significant financial strength to invest in its core growth platform as well as next generation cybersecurity, cloud, data, and IoT technologies,” Hume said in a statement today.

The merger is significant not only for resellers, system integrators and the enterprises that rely on them but also the IT industry’s top technology firms. Synnex and Tech Data drive large amounts of business for the IT suppliers whose products they distribute. Between them, the two companies work with more than 1,500 suppliers and original equipment manufacturers.

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