Participating in the accelerating consolidation of the distribution industry, either as a buyer or a seller, is becoming more important, says Jay Greyson, principal for distribution-focused Supply Chain Equity Partners, in this month's episode of MDM Executive Briefing.
“It’s just not as safe to be sitting as a small- to mid-sized distributor anymore,” Greyson says, because the competitive environment for a given distributor can change overnight. Distributors need to consider that once-weak competitors can strengthen their IT systems, gain vendor leverage and improve operational efficiencies extremely quickly when acquired by another company.
But making acquisitions just to be making acquisitions doesn’t make sense, Greyson says. Distributors must first ask themselves what they want to accomplish with their businesses, whether it be geographic expansion, new capabilities or anything else. They must then ask themselves whether those goals would be better accomplished organically or through consolidation.
Watch the video below to hear why Greyson says every distributor should consider itself to be either a buyer or a seller.
Greyson also says it’s easy to “fall in love” with a company when considering acquiring it. He says distributors must be thorough when conducting due diligence and should seek outside help with the process.
To keep acquisitive distributors focused on strategic goals, industry consultant Brent Grover recommends establishing and following a set of acquisitions criteria to avoid wasting time on acquisitions that won’t “move the needle.” He provides a criteria framework in his most recent book, available here.