Mergers, acquisitions and other combinations are commonplace in the channels world. Owners retire, businesses fail, technology shifts, opportunities arise. However, in the grips of the recent recession, distribution deals slowed dramatically. Now, with signs of life in the U.S., Asia and other economies, stronger channel companies have begun to pick through the bargain barrel looking for good acquisition candidates. Just recently, Kaman Industrial Technologies, bought Minarik, a national controls and automation distributor. Industrial Distribution Group is buying Alamo Iron Works, an industrial supplies distributor out of bankruptcy. Computer distribution giant, Avnet, Inc. recently announced its largest deal ever, buying Bell Microcomputers for $594M (equity plus debt assumption).

These acquisitions pose both risks and opportunities for suppliers’ channel strategies. On the plus side, suppliers can derive sales and logistics efficiencies by working with a smaller set of partners. Larger partners can commit more serious capital and marketing resources to supplier programs. Merged partners sometimes creates a more sophisticated selling or technical capability, broadening the channels reach into new solutions and customers.

Unfortunately, the downside of distribution deals is probably more impactful. Acquisitions give distributors more volume and customers, and, therefore more negotiating power with suppliers. Acquisitions distract channel management and employees - potentially interrupting marketing programs and other activities. Acquisitions can upset finely-honed territory assignments raising the risk of channel conflict. Sometimes, a competing manufacturer might buy a key distributor, thereby marginalizing or eliminating that partner as a channel for other suppliers.

Individual distribution deals are notoriously difficult to predict. However, manufacturers can anticipate types of deals, and their implications. For one of our clients, we are working on a “what if” acquisition playbook. This type of planning can reduce the reaction time and negative impact when channel deals suddenly pop up.

I expect to see channel deals heat up even more in the next few months. So, as my old Boy Scout troop master used to preach, “Be Prepared”.