PROMZ VAK 03-2024

34 35 2024 - number 4 - promzvak.nl In nearly every issue of PromZ Vak and the online newsletter, there are reports of mergers, acquisitions, and/or dissolutions of distributors and/or suppliers. A lot is happening in this area. The previous issue of PromZ Vak briefly touched on how distributors and suppliers are thinking about their business continuity. This topic is garnering significant attention, so it’s worth delving deeper into it in this issue of PromZ Vak. HOW IS THE BUSINESS CONTINUITY OF DUTCH DISTRIBUTORS AND SUPPLIERS? BY ED VAN EUNEN From the latest PromZ Vak survey, From the latest PromZ Vak survey, the 2024 Interim Measurement conducted in April, it emerged that the average respondent working at a distributor is 53 years old, as shown in Table 1. For suppliers, this average is slightly lower at 49 years. The respondents in the Interim Measurement are often part of their company’s management, either as executives or management team members. The average age of over 50 years among distributors means they still have considerable time ahead. However, there must be contemplation about the company's future. This becomes more critical as half of the distributors expect their company to have a different owner in 10 years, and 8 the same is true for a third of the suppliers. It’s clear that significant actions need to be taken. What is Being Considered? There are many ways to ensure the continuity of your business, and most distributors and suppliers seem to have a positive outlook on this, as shown in Table 2. For example, a quarter to a third of the executives of distributors and suppliers are considering expanding into other sectors. One in six distributors is looking for other parties to acquire, but similarly, one in six thinks about ensuring continuity by attracting new executives in the future. Less than 10% consider downsizing or dissolving their company. Suppliers are somewhat more inclined than distributors to seek expansion and/or acquisitions. They frequently consider expanding their activities abroad. This means that in various boardrooms of suppliers and distributors, they are looking through their contacts for potential partners for business deals. This can involve a regular acquisition where shares and/or business activities are taken over and settled, sometimes by paying a lump sum, but often by basing the acquisition price partly on the profitability of the party being acquired in the coming years. We predict that in the coming years, numerous forms of collaboration between various companies in the industry will emerge. We also examined whether there are differences in the age of executives when it comes to business continuity. Younger executives, more than older ones, think about acquiring other parties and attracting external investors. The latter is explicitly not mentioned as a possibility by the over-55s in the research sample. It seems that younger executives are somewhat more aggressive and assertive regarding their company's future. This is an interesting and positive development, showing belief in the sector. Remarkably, the over-55s see more in expanding their activities into other sectors. Comparison with Other Sectors What about mergers and acquisitions in other sectors? The CBS (Statistics Netherlands) tracks all mergers and acquisitions in the Netherlands in its General Business Register. There are about 7,500-8,000 mergers and acquisitions per year (the 2023 figures are not yet complete). To compare with the promotional products industry, we look in Table 3 only at the mergers and acquisitions in the 'Trade' sector (which also includes retail). This involves more than 1,000 mergers and acquisitions per year. Table 3 shows that especially during the COVID-19 years, the number of mergers and acquisitions in the Netherlands increased significantly. Now, this number is decreasing again. We also looked at whether there is a relationship between company size and the number of mergers and acquisitions. Table 4 shows that mergers and acquisitions are quite spread across different company sizes. Of course, the question of how many trading companies are active in total, divided by company size, is important. The total number of trading companies is more than 273,000, two-thirds of which are one-person businesses (companies with one employee or working owner). Keeping this in mind, Table 4 shows that mergers and acquisitions mainly occur in larger companies in the trade sector. CBS figures indicate that less than half a percent of trading companies are involved in a merger or acquisition annually. We suspect that in the promotional products sector, this figure will be higher, given the percentage of companies considering business continuity and explicitly not ruling out mergers and acquisitions. The future will tell, but significant developments seem certain. Table 1: Age of Dutch Distributors and Suppliers Distributors Netherlands Suppliers % % Expansion into other sectors 31 27 Merger with/acquisition by another party 18 13 Succession planning for departing executives 17 20 Acquisition of one or more other parties by us 17 33 Expansion of activities abroad 11 40 Downsizing/dissolution of the company 8 - Attracting external investors 3 - None of the above 34 33

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