For businesses valued from $5M to $100M+
Considering selling your distribution business?
Distribution businesses are valued on the durability of supplier relationships and the quality of gross margin, not on revenue scale. A large distributor with fragile supplier agreements is worth less than a smaller one with secure lines.
- Supplier agreements
- Exclusive territories
- Change of control provisions
- Gross margin trend
- Inventory turns
- Customer concentration
- Private label mix
- Working capital requirement
- Adjusted EBITDA add-backs
What distribution buyers are actually underwriting
The first document a buyer asks for is not the P&L. It is the supplier agreements.
Term, exclusivity, territory and change of control provisions determine whether the business a buyer is acquiring survives the transaction. A key line that can be pulled at closing is an existential risk, and it gets priced as one.
After that, the focus moves to gross margin: its level, its trend across three years, and whether any decline has an explanation the buyer finds convincing. Working capital is the third question, because in distribution it is large enough to affect the structure of the deal itself.
What gets examined closely
- Supplier agreements: term, exclusivity, territory and change of control provisions
- Gross margin by product line and its direction over three years
- Inventory turns, aging and whether obsolescence has been reserved honestly
- Customer concentration and the contract terms behind the largest accounts
- Private label or proprietary product as a share of total margin
- Fill rate, service level and what customers actually buy from you
- Working capital requirement, seasonality and the normal level
- Warehouse, logistics and systems capability
Who buys distribution businesses
Private equity platforms and their add-ons
Distribution platforms want margin stability and supplier relationships that survive a change of control. They will read every agreement, and they will want to talk to your major suppliers before closing.
Strategic acquirers
Larger distributors and manufacturers buying channel, territory or product access. A manufacturer acquiring downstream may value your customer relationships well above the financial profile alone.
Which type of buyer suits you depends less on the multiple than on what you want afterward: a clean exit, a second bite through rollover equity, or a few more years running the business with someone else's balance sheet behind it. That is worth deciding before you go to market rather than during.
- Supplier agreements with change of control clausesIf a key line can be pulled at closing, the buyer prices that risk heavily or walks away from it
- Margin erosion nobody has explainedThree years of declining gross margin will be underwritten as the new normal unless you can show otherwise
- Inventory that has not been reserved honestlyAged stock found in diligence comes straight out of working capital and out of the price
Where distribution owners lose value
Almost always in the same three places, listed alongside. None of them are inevitable, and all three are decided well before a letter of intent is signed.
Reviewing your supplier agreements for change of control language, and addressing it quietly in advance, is the highest-leverage preparation in this sector.
Request a confidential valuation.
An advisor who works with distributors will review your business and give you a real range.
- No cost, no obligation, strictly confidential
- Grounded in what buyers in your sector are paying now
- Useful whether you sell next year or in five