PPB November 2018

FEATURE | Mergers & Acquisitions what they want and how this will affect the future of the market. Understanding the what, the why and the how of the issue can also help suppliers and distributors answer the most important question: Whether making or being part of an acquisition is the right decision for them. Why Mergers And Acquisitions Happen There are multiple complex reasons why a company would decide to purchase a competitor, including customer demographics, regional access, increased efficiency and superior buying power. However, in the end, most of those explanations can be reduced to one word: money. “The increased sophistication and the increased demands of businesses have increased the cost to suppliers and distributors in our industry,” saysMarc Simon, president of HALOBranded Solutions in Sterling, Illinois, who has overseen his company’s acquisition of multiple distributors including Sunrise Identity, Michael C. Fina Recognition, CatalystMarketing, American Pacific Promotions andNewtonManufacturing. Acquisitions fill needs for both companies. “The need for product safety, for social compliance, for connectivity, for network security, for PCI compliance, for web stores, for creativity, formany other thingsmandate that suppliers and distributors develop meaningful scale quickly or perish,” he adds. It’s no secret that the cost of doing business has increased steadily over the years, due in part to external pressures like government regulation and material costs, as well as internal forces like the drive toward product safety and compliance. Meeting these demands while remaining profitable requires ever-increasing income, which can be a challenge in dense markets where most potential clients already have preferred vendors. That leaves few options for expanding, and only one with large returns. The Acquisition Inquisition: Three Questions To Consider Before Buying Or Selling David Miller, president of Chocolate Inn/Taylor & Grant/Lanco in Ronkonkoma, New York, and Lance Stier, principal of NC Chocolate (parent company of Chocolate Inn/ Taylor & Grant/ Lanco), have completed several acquisitions and mergers in the past several years, and have learned a thing or two about what makes a good deal. “We seek businesses which are synergistic with our existing business and either build scale within a category or provide a platform in a new category,” they say. Before making any acquisition, Miller and Stier ask themselves three questions. Whether you’re looking to sell your business or buy another one, review the following to see if the deal makes sense to you. 1 Does the acquisition address a customer need? A merger may look great on paper, but if it doesn’t translate into more sales, it’s a sunk cost. “We interview our customers prior to making a deal about the category,” they say. 2 Will the purchase strengthen the company’s products or services? A signage supplier may not know the first thing about selling a polo, and a superstar distributor can’t land a single sale if his or her new customers don’t speak the same language. Before making any moves, be sure the deal makes sense for your business. 3 Can the business be consolidated or streamlined and made profitable? Businesses that aren’t well run can be a better option for acquisition. Technology and economies of scale can turn a mid-tier purchase into a powerhouse—if they have the customers to back it up. After you answer all those questions, Miller and Stier recommend considering one more: Do you want to work with the other company in the equation? “We like partnering with solid management teams who, like us, share a passion for building businesses and common values,” they say. 64 | NOVEMBER 2018 |