An independent manufacturers’ rep is in the midst of enjoying years of a positive relationship with a principal. The tenure between the two companies is something they both boast about. Mutual expectations have historically been agreed upon and realized and sales continue on an upward path.

Then, one day the principal is bought out by another manufacturer, or a venture capitalist enters the scene with its own plans for the future. What follows are the dreaded words: “I don’t expect to make any changes to our current relationships.” Shortly thereafter that rep — and very probably the entire independent rep network — is terminated.

Sound familiar? The aforementioned is an oft-repeated scenario and because it is oft repeated it served as the timely basis for a MANAchat
earlier this year.

Over the three-day period of the chat MANA members who have experienced termination similar to what has been described compared notes. To be perfectly honest, the scenario isn’t always negative, and some reps admit that they have been able to negotiate buyout terms repeatedly and quite well. However, there are any number of instances where the results of such buyouts have served as a negative for reps.

Solving Problems

The stage was set for this discussion when one participant voiced the opinion that “I was always taught that you should not have getting orders or selling the product as your goals. What you are there for is to help the customer anticipate and solve their problems. If you do that properly and professionally, you’ll get the order anyway. Admittedly, sometimes new owners will take over a company and they don’t have a working understanding of the sales process. The truth is customers will buy from people whom they know and trust. If you’re not in front of them, then they’ll buy from their second favorite rep; or, they’ll go to a competitor.”

To kick off the conversation, one rep admitted, “I’ve had this happen to me any number of times over the years. I’ve survived several buyouts and in many instances my services have actually been retained until I retired. As a matter of fact, I’ve actually survived five buyouts over a period of 25 years. That was great but then the sixth buyout occurred. In that case the new owners felt they were paying me too much for my services and they didn’t have a need for me anymore. To counter that I had an experience with another company that paid for life of part for 20 years. I certainly can’t complain about that.

“My opinion is that if you’re a valuable piece of the sales force and you perform at a high level and work at having excellent relationships with the ownership of the company, then you can carve out a positive result for yourself. You do that even if you feel like you don’t like the new owners. You do what’s best for yourself.”

Not Always a Negative

Noting that his agency has lost major lines over the years due to the aforementioned circumstance, one rep maintained, “It’s not always a doom-and-gloom situation. Remember, if you have value, product and territory knowledge and know how to nurture relationships, there’s always something you can do about the situation. In the past, when we’ve faced this situation, rather than just sit around and complain and worry, we’ve jumped on a plane directly to the factory and taken the steps to make a case for our firm to be retained. I’ve got to admit that this approach has usually been met with positive results.

“Don’t sit back and wonder about your fate — determine your own fate. To do that, you have to know who’s who at the company in order to make sure you’re well connected. In addition, I’d add that if a change is going to be made in their representation philosophy, you generally know about it ahead of time. Since that’s the case, you can usually approach this situation in a proactive manner.”

Echoing those thoughts, another rep stressed that “when faced with a takeover, we’ve actually had some success in re-interviewing for the line. You’ve got to realize that this is not the end of the world. Your approach is going to necessitate some nuance and conditioning on your part, but it all comes down to doing what you do best — selling yourself.”

Selling Yourself

Another rep emphasized how important it was to put yourself in the shoes of the company that has just purchased the manufacturer. To do that you have to be prepared to sell yourself and prove to the new owner that you are worth it and there are no better options available to them. You’ve got to work hard to make that case.”

As an example of working harder to make his case, one rep volunteered, “I make it a point to be more involved in the business than just trying to get the order. When I talk to my principals, I emphasize to them that the gross margins they enjoy on the products I sell are much better than those margins on the higher end of their product list. I use that argument as leverage whenever I communicate with them. That’s an example of providing them with proof of my value.”

Adding to those comments, another rep noted, “What this all comes down to is marketing (or backselling) yourself to your principal. Remember that trying to sign with a principal is a very competitive sport. And, the rep who does it best is the one who is going to get the line. In order to do it best you have to have things in your tool kit that enable you to market yourself and show principals how well you can perform on their behalf.

“Consider for a moment how many times we’ve all heard the argument that reps make too much money. To counter that, principals have to be reminded that it costs a lot of money to run a rep business. There are salaries, withholding, medical expenses, travel, website creation and maintenance, etc. Those are all expenses that commissions pay for. Those commission checks don’t simply go into the rep’s pocket.”

Preparing Ahead of Time

If backselling and defining value are important ingredients to have when communicating with principals, the chat participants also emphasized how important preparation for a termination is when dealing with a new principal’s ownership. Speaking to that subject, one rep said, “We all have to agree that when a new owner takes over a company, it can be a tumultuous experience. To deal with that, I’ve always made it a habit to maintain a file entitled ‘Future Principals.’ When the worst thing (termination) occurs, I’m ready and have other options available to me.”

Another means of being prepared was volunteered by a chat participant who reminded his fellow reps on the call that it’s always recommended to consult with a rep-savvy attorney when an acquisition could affect the relationship between rep and principal. “To that end, MANA has a comprehensive list of attorneys on its member website that can aid members.”

Finally, another rep stressed how effective a rep council could be. “I repped a company that had 30 reps in the field covering the entire country. The company was rep friendly, and the council was effective in creating an educational atmosphere that worked for both sides. We educated the principal and the reps educated themselves. Now with the effectiveness of virtual meetings, it’s a very simple process to create an effective rep council. I would encourage more people to bring up this subject with their principals.

MANA welcomes your comments on this article. Write to us at [email protected].

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List of MANAchat Participants

MANA wants to thank the following members for their contributions to the “After Your Principal Is Purchased — What Now?” Agency Sales magazine article. These online virtual meetings create a platform where members exchange information on how to successfully operate their manufacturers’ representative businesses. Jack Foster, Agency Sales magazine editor, wrote the article using the information and knowledge these members provided during the MANAchat discussion on dealing with principals mergers and acquisition issues.

Thank you! We sincerely appreciate the time you took to participate in the MANAchat and particularly the information and knowledge you shared.

Eric Blythe
Advanced Engineered Products
Titusville, FL

Kyle Barraclough
Barraclough, Kyle
Henderson, NV

Peter Thomas
Brandon Associates., Inc.
West Chester, PA

Paul Gottes
Chaparral Technologies, Inc.
Fort Worth, TX

Michael Fontaine
Falcon Project Consultants
Houston, TX

Ron Marks
Marks Management Services, Inc.
Birmingham, MI

Mike Bryk
RMB Specialties Inc
North Royalton, OH

Earl Letzelter
Synergetic Sales, Inc.
Clarence, NY

Tom Leslie
Thomas M Leslie & Associates, LLC
Arcadia, CA