Selling a distribution or wholesale business in Ontario

Usually on normalized earnings, adjusted EBITDA for most established distributors or seller’s discretionary earnings for smaller owner-run ones, judged against how dependable those earnings are. Buyers look closely at gross margin stability, supplier agreements, customer retention and concentration, inventory quality and how much working capital the business needs to operate.

It depends on the agreements. Some can be assigned, some need the supplier’s consent, and some can be ended if the company changes hands. Informal relationships carry their own uncertainty. We review the agreements early, and in many sales the buyer will want comfort from key suppliers before closing, so how and when to approach them needs planning.

Buyers typically value inventory they expect to sell in the normal course of business. Slow-moving stock is often discounted or negotiated, and obsolete stock is usually written down or excluded. A recent physical count, an inventory aging report and clear write-down policies make this a short discussion rather than a long one.

Most purchase agreements set a normal level of working capital, mainly receivables plus inventory minus payables, that the business must have at closing. If the actual amount is higher or lower, the price is adjusted. For distributors, where inventory and receivables are large, how that target is set can change what you receive by a meaningful amount.

It can, if it is secure, long enough to matter and transferable to a new owner. An exclusive territory a supplier can end on short notice, or after a change of control, offers less comfort. Buyers will weigh the strength of the agreement, the supplier’s importance to your sales and how easily customers could buy the same products elsewhere.

It varies with the size of the business, how prepared it is and the buyer’s financing. Preparation, marketing, negotiation, due diligence and closing together often take many months, and some sales take a year or more. Supplier discussions and inventory counts can affect timing, so we plan for them from the start.

A business broker typically lists a business and responds to the buyers who come forward, which suits many smaller, simpler sales. An M&A advisor, sometimes called a business sale advisor, prepares the business for a buyer’s scrutiny, normalizes the financial statements, approaches suitable buyers confidentially, negotiates price and terms, and manages due diligence through to closing. Where supplier agreements, inventory and working capital targets drive the outcome, as they do in most distributors, an advisor’s preparation and negotiation usually matter.

No. A conversation two or three years ahead gives you time to diversify suppliers, document customer relationships, clean up inventory and tighten financial reporting, which are often the changes that matter most to buyers.

We normalize the financial statements, analyse margins and working capital the way a buyer will, help you set realistic price expectations, prepare the confidential information package, approach and screen buyers, coordinate supplier and customer questions at the right stage, help you compare offers and manage due diligence through to closing.