The Makings of a Merger
There’s a vast difference between knowing a change is necessary and knowing the necessary steps to make a desired change. Just ask industry veteran Dave DeWitt—no relation—who set out to bolster his Detroit-based distributorship, ACE, against the slings and arrows of a harsh economy. In and of itself, ACE lacked sufficient resources to remain successful in a fiercely competitive marketplace facing an uncertain future.
November 2006 was an especially bad sales month for ACE and the writing, said DeWitt, was clearly on the wall. “I have a right-hand person, but she couldn’t anticipate what [was] going to happen and how we should react, either. I mean, give us a task and we’ll get it done. But, strategizing where we want to go, how we are going to get there and looking at new options isn’t our expertise, especially since we’re operating a small organization where we’re doing everything ourselves.”
Partnering with another distributorship appeared to be the solution; setting the process in motion, however, proved to be the challenge. So, DeWitt just started doing what sales professionals do best when pursuing a deal—he talked to people.
Seek and Ye Shall Find
“My approach was to first see if I could speak with someone locally who had already gone through [a merger]; not because I was necessarily looking to work with [that particular company], but [because] I wanted to find out what [the owners] went through, the issues they had to think about, the actual process, even the pitfalls,” reflected DeWitt. He initially investigated opportunities with a couple of the larger national distributorship networks. Although there was tremendous support from the corporate offices, DeWitt felt he wanted more face-to-face interaction with people on a daily basis for brainstorming and discussing new ideas.
In December of ’06, he learned of a distributorship in Detroit that had fairly recently sold its business, and arranged a lunch meeting with the former owner. “I explained I was thinking of selling or merging my company and wanted to know about his experience,” continued DeWitt.
Now himself a business broker for the organization that handled his company’s transaction, the former owner suggested a few prospects. One was a large, sophisticated distributorship heavily involved in multimedia projects and high-level marketing. “The company is so big, I feared we would end up being just a little cog in a very large wheel,” shared DeWitt. “We have a lot of smaller customers, but they were looking for home-run accounts bringing in $500,000 a year or so. I wasn’t sure I wanted that kind of pressure, and I also didn’t want someone not appreciating what I bring to the table.”
He then met with a smaller distributorship, but one of the partners was planning to retire in the very near future, and the organization, in general, wasn’t inclined to engage in the level of industry networking DeWitt thrives on. “I needed the interaction, but I also needed [a company that was] progressive and moving forward,” he added.
His prospecting eventually lead him to Advanced Marketing Partners (www.advancedmarketingpartners.com) and co-owners Phil Schmidt (a former head of the DMIA, now the PSDA) and Dave Carapellotti. “Phil said he was having the most fun in business he has had in a long time,” recalled DeWitt. “The company had just changed its name and adopted a great new marketing slogan—‘Dynamic Print, Web and Promotional Solutions.’ The sales reps have been in the industry for some time, so there were knowledgeable people with whom to touch base and brainstorm. In general, they’re a forward-thinking group with a good attitude.”
DeWitt went on to say Advanced Marketing Partners also appreciated his foothold in the office-supplies niche. “ACE sold a lot of laser cartridges and paper, and [Schmidt and Carapellotti] were happy to now be incorporating that piece,” he explained. “Their rationale was the main competition out there today is from the big box stores selling printing, stock forms and supplies on the Web. [The merger] was [coinciding with Advanced Marketing Partners’] efforts to increase its Web presence. So, adding office supplies really fit into the overall marketing plan.”
DeWitt went on to say the fact that a distributorship similar to ACE successfully merged with Advanced Marketing Partners just the year before helped confirm he was making a solid business decision.
Do’s and Dont’s
Because economic necessity has prompted many distributors to strengthen their positions in the marketplace, DeWitt shared his experience with Print Professional hoping it could help others successfully navigate the transitional waters.
“Confidentiality is so important,” he stressed. “I had everyone I spoke with sign a confidentiality agreement because if your customers, vendors or employees find out, any one of the three can sink the process or affect it negatively. I didn’t want pressure from anyone. It’s stressful enough doing the investigations without having those outside factors.”
DeWitt was also reminded that in any business negotiation, timing is everything. “The nice thing is, we weren’t desperate, although we had to do something,” he observed. “Even if you are feeling uncertain or you’re not quite sure where you are going, take some time and evaluate [the situation] before your back is up against the wall. That’s so important, [otherwise], you give up some negotiating points and the ability to make the best decisions based on the attributes ... available to you.”
DeWitt’s own evaluation of ACE during this time made him painfully aware of the 4,000 square foot building that wasn’t being used and the fact that ACE was overstaffed for the business it was doing. “It was draining us,” he remarked, “and the fix required a huge move, not a casual tweak. The hardest thing was letting people go who [had been] with us for 20 years—that was brutal.”
When meeting with prospective companies, DeWitt made sure his wife, Susan Phillips DeWitt, who is also his business partner and the person who handles ACE’s financial matters, accompanied him. “It really helped to have another perspective. We were able to debrief on the way home and talk about the positives and negatives of each situation,” he remarked. “Also, there is a member of our church who is a CPA and an attorney, as well as a friend, who my wife and I referred to as our kitchen advisor during this time. He literally sat in our kitchen on three separate occasions and we just sort of bounced things off him. Even though he isn’t in the industry, he certainly asked pointed questions and offered insights that helped in our discovery process and in preparing for the meetings [with prospective companies].
All’s Well That Ends Well
ACE’s merger with Advanced Marketing Partners became effective January 11, 2008, and DeWitt already has benefited from the support and new opportunities. “I have more time to focus on my customers without worrying if the computer system is working or not, or getting bogged down with various administrative distractions,” he reported.
An added bonus has been the growth of a long-standing ACE account—a premier yacht club—that up until now only purchased paper and some office supplies. “In the past, I had tried to sell them some marketing materials, but it didn’t click; [ACE] wasn’t perceived as offering enough added value to them,” DeWitt recounted. “I did have a relationship with the marketing and membership manager, and she called for a quote on a new design for sailboat racing flags. The graphics people here [at Advanced Marketing Partners] did a new design and the yacht company loved it right out of the shoot. Although we didn’t get the printing piece, we did get the design piece, which meant a little bit of a foothold in credibility with the [yacht club’s] marketing department.”
It wasn’t long before the client contacted DeWitt for a quote on new member-generating materials, and awarded him the bid. “I would never have gotten this as ACE,” DeWitt contended. “Advanced has creative and graphics people, [as well as customer-service reps] who can do joint presentations with me. It’s a great collaborative effort.”
DeWitt explained he still maintains ACE as a shell company for billing purposes with a large automotive account, fearing the change would be perceived as a negative. “I’m still supplying [the account] with product, but needed a way to bring more value and keep the sales volume going. It was already atrophying a bit,” he noted. “The client was becoming very interested in online ordering, and that was always a big bugaboo for me—figuring out how to [offer e-commerce] without spending 30 grand I didn’t have on a full-blown site. [However], it is in Advanced Marketing Partners’ [strategic] plan. There are some sites already in place, but [the program is being] upgraded to make it more robust. This is a major plus with [the automotive client].”
Of course, each situation will be different, but DeWitt cautioned his fellow distributors that it is extremely stressful keeping a business going while trying to figure out a new direction. And certainly no one, he pointed out, should make a precipitous move when it comes to a merger. It took ACE more than a year, but what started out as some minor networking developed into the deal of a lifetime.
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- People:
- Susan Phillips DeWitt
- Places:
- Detroit