Strategic Buying a small broker

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by a professional from Marquette University
in Minnetonka, MN, USA

2yrs ago

Strategic Buying a small broker

Asking for a friend. $10MM packaging company gets some business from industry brokers, a common practice. Broker has $1MM in sales and nets $350K a year. Broker is nearing retirement and offering to sell his "business" to the strategic. I don't believe the strategic can do all the $1MM of work that the broker manages. Let's say it's $500K. Is there a deal there that makes sense, for either party? I couldn't imagine paying a multiple of a small amount of cash flow that is not backed by some contract or exclusivity. I would think the broker should just work until he retires and maybe there is a small revenue share thereafter for 12 months but it just seems like more trouble than it is worth and fraught with issues of non-compete, non-circumvention and no guaranty buyer keeps the business.

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reply by a searcher 2yrs ago
from Emory University in Tucson, AZ, USA

The primary role of a print broker is to connect customers with the most suitable manufacturer based on factors like capabilities, delivery speed, and price - generally more complex projects or a high hurdle (like needing a rush job).

Considering this, the broker's business value lies in their network and expertise. Instead of selling to a strategic buyer, it would be more beneficial for the broker to sell their book of business to another broker who can maintain the existing relationships and value proposition for their customers.

My partner, experienced in domestic and international print buying, purchases direct or uses independent brokers. If the broker is no longer independent, he's not extracting the value benefit of using a broker.