B2B, Industrial & Distribution · Buyer guide
Buying a Wholesale Distribution business
Published · Reviewed by The Diligence Standard Team · Updated
Distribution businesses can have large revenue and thin margins. Small changes in supplier terms, inventory quality, freight or customer pricing can materially change cash flow.
How the business works
Customer and supplier concentration, gross-margin durability, inventory turns, working capital and channel rights determine value.
Risks to test
- Supplier concentration or non-transferable terms
- Obsolete inventory
- Customer concentration
- Thin margins vulnerable to freight/pricing
- Large working-capital needs
- Channel conflict
Evidence to request and reconcile
- Customer and SKU profitability
- Supplier spend and agreements
- Inventory aging
- AR/AP aging
- Freight and rebate records
- Territory/channel agreements
Decision questions
- How much margin depends on rebates or favorable supplier terms?
- What inventory is slow or obsolete?
- Can key supplier agreements transfer?
- How much working capital must remain in the business?
- Which customers are low-margin despite high revenue?