What Cleaning Distributors Should Know About M&A

Owing to a confluence of factors, mergers and acquisitions (M&A) continue to have a significant impact on the jan/san distribution industry. Stiff competition, sustainability, and the drive to increase efficiency are some of the key motivators as distributors look to expand market share and integrate solutions that cater to a diverse clientele. Add to this an aging population, and it’s no wonder that owners nearing retirement age may well consider M&As their lifeline. 

“Our industry is maturing, and as the people who own these businesses get older and the competition gets tighter, it gets more difficult to run a business,” notes Bill Griffin, president of Cleaning Consultant Services Inc., Seattle. “It’s more expensive to get financing and it’s more difficult to find employees, so distributors are starting to look at consolidating.” 

Remaining Agile 

Despite frequent offers from competitors, Nick Spallone, CEO of Tahoe Supply Co., Carson City, Nevada, is not interested in selling his business. He attributes his success to his go-to-market strategies and the fact that Tahoe Supply Co. is family-owned.  

“A lot of family businesses ask people to do things above and beyond their job description, and that takes a special kind of person who is free-thinking and wants to be a problem solver,” he explains. “The larger an organization gets, the more structure it has. But smaller companies can allow greater flexibility. Our strength is our ability to be flexible and we’re quicker to market with ideas.” 

Griffin seconds the notion that small, independent distributors have greater agility than larger corporations when it comes to running a business. Whether they’re issuing a check or replacing broken equipment, large distribution companies typically have multi-step procedures in place that require documentation to ensure compliance and accountability. 

“When you get behind the scenes of some of these large companies, you see all these controls in place,” he says. “In a smaller company, you can make decisions quickly and get to the owner, who is probably upstairs.” 

Additionally, Griffin notes that local distributors excel at offering personalized service — a trait that may get watered down as the company gets bigger. On the other hand, as more independent distributors struggle to stay afloat and/or contemplate retirement, joining forces with a larger company can be appealing. Economies of scale, greater financial resources and technological might are just some of the attractive assets of large distributorships.   

Although Spallone has no intention of selling his business any time soon, he admits that going solo can take a toll. 

“We have 50 employees that work for us, and they are like an extension of my family,” he says. “I think about their wellbeing every day. It’s a lot of pressure and a huge responsibility.” 

But for some distributors, the mounting challenges and stresses of running a business today outweigh the rewards. 

“I can see how some distributors just don’t want to deal with the financial aspects of running a business, or the increase in regulations,” Spallone notes. “Many small businesses wave the white flag to that.” 

Even though industry fluctuations and business challenges are continuing to mount, there are still plenty of independent jan/san distributors who are unwavering in their pursuit of success.  

“I’m a fiercely competitive person,” says Spallone. “I still love what I’m doing, and I find it very rewarding.”  

Weathering the Storm 

No doubt, being part of a larger corporation has numerous advantages, including more capital and resources to invest in technology, marketing and operational efficiencies. Nevertheless, independent distributors can still be competitive in the marketplace.  

“I don’t think people should feel that they can’t compete anymore just because they’re not part of a large company,” says Spallone. “Figure out your competitive advantage, and make sure you stay focused on that part of your business. If you go out and create value, you can compete.”  

For distributors who aren’t ready to throw in the towel, targeting a niche market is one way to secure customer loyalty and grow the business. As Griffin points out, no one knows local customers and their needs better than an independent distributor who has served the community for decades. At the same time, he warns distributors not to get too comfortable in their geographical location. 

“These days, if you want to be on top of what’s going on in the sanitary distribution side of the industry, you have to attend international shows,” he says. “They’re three to seven years ahead of the United States in technology. Get involved and find out what the latest developments are.” 

Spallone takes this advice to heart: He plays an active role in the industry and has served on the boards and committees of both ISSA and buying groups.  

“Acquisitions have been like a storm around us, and what we need to do as a company is to be consistent,” he says. “Being that calm in the storm has been our rallying cry for the last couple of years.”