Distributor Buyout
A regional buyer, a forty-person distributor and supplier contracts that could not transfer without consent.
Read the Summary
Overview
Our client, a regional supply company, agreed to buy a long-established distributor from its founder. The distributor’s value rested on two supplier agreements and a sales team with deep customer relationships. Most of those customers had never met the buyer.
Both supplier contracts required consent to assign, and several sales staff worked without written agreements. Losing either supplier or the sales team would have undercut the price the buyer had agreed to pay.
Results
We structured the deal as an asset purchase, ran diligence on contracts, employees and liabilities, and negotiated supplier consents before signing. New offer letters with fair restrictive covenants kept the sales team in place.
An escrow and a twelve-month transition agreement with the founder protected the buyer after closing. Both terms were negotiated before the letter of intent became binding. Neither side reopened price.
Legal Outcome
Both supplier consents were delivered before closing, and every member of the sales team accepted the new offer letters.
- Asset purchase agreement with a negotiated escrow and a twelve-month holdback
- Written supplier consents secured before the purchase agreement was signed
- New offer letters with fair restrictive covenants for the full sales team
Conclusion
The buyer closed on schedule and kept the relationships that made the distributor worth buying. Customers saw no interruption in service during the first quarter under new ownership.
The founder stayed on for the transition year, introducing the new owners to every major account and helping the sales team settle into the new structure.
Illustrative matters for a fictional firm. Figures show deal or license value, not fees or court awards. Past results do not predict future outcomes.
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