Distributors are under increasing pressure. According to the '2023-2024 China FMCG Distributor Operating Conditions Survey Report' released by New Distribution in August this year, about 50% of distributors faced declining revenue and profits in the first half of this year. In the snack food sector, only 31.4% of distributors saw revenue increase, and 8.6% saw profit increase. Overall, constrained by sluggish downstream store sales and the impact of new channels, distributors' business is indeed becoming more difficult. In such an environment, how can distributors avoid being eliminated? Yi Dianlong, founder of Dalian Yixiu Trading, Junhe Wanli Trading, and Xiangyu Food, has given his answer: M&A. Seven years ago, a spark of an idea led Yi Dianlong onto the path of M&A. Over the next five years, he successively merged and integrated three distributors, doubling his business scale from 20 million to 80 million yuan, representing brands such as Leba, Starbucks, and Zihaiguo. He hasn't stopped. When asked about future plans, he said: "This year, I'll first integrate B2b, and next year, I'll merge two more!" I hope his story can bring you some thoughts and inspiration. Merging Three Distributors in Five Years Adding to the Business One person, one truck, and a 20-square-meter garage. That was Yi Dianlong's starting resource in 2010. At that time, he was just a salesman who had been in the market for six years and had just resigned. "When I first started my business, I thought earning 500 yuan a day would be great. Unexpectedly, my customers were very supportive, and I could earn one to two thousand yuan a day." Hardworking and down-to-earth, Yi Dianlong had built a good reputation during his six years as a salesman. When he began trying to do snack food agency on his own, more than 200 old customers extended olive branches to him. "After half a year, I couldn't handle it alone, so I started hiring drivers to work with me. From then on, at that pace, I added people and vehicles every year." By 2017, Yi Dianlong had achieved annual sales of 30 million yuan. When he wanted to further improve performance, he found himself stuck at a bottleneck. It was difficult to achieve growth using past methods. Yi Dianlong changed his thinking and boldly speculated: Since one company can achieve 30 million, can two achieve 60 million, and can three piece together 80 million? Next, Yi Dianlong, with products as the main measure, embarked on his M&A journey. First M&A: Introducing Mid-to-High-End Imported Food + Channels In 2017, the products Yi Dianlong operated were mostly small brands from second and third tiers. The first target company focused on mid-to-high-end imported food, and the product lines of the two sides were very different. But he believed that mid-to-high-end imported food was also an emerging trend and needed to be laid out in advance. Through this M&A, not only did he achieve the expected product complementarity, but it also opened up new channels for him, such as campus, CVS, and WeChat business. Second M&A: Introducing Local Hot Products + Channels In 2019, to expand influence among stores, Yi Dianlong believed that he needed a local brand with high recognition and traffic to support it. He set his sights on the 'Leba Potato Chips' operated by the second company. This snack had annual sales of about 10 million yuan in Dalian. "At that time, I thought that if I could bring this product into my team, it would bring a qualitative change to the annual activity of overall stores," Yi Dianlong recalled. At the same time, the other party also had unique channel advantages: first, their customer base was mostly wholesalers; second, they also had more than 200 local chain supermarket channels. After integration, Yixiu Trading's products achieved doubled sales that year through these channels. Third M&A: Introducing Brand Products and Supplementing Scale In the third move, Yi Dianlong had a clear goal. He saw the brands in the other party's hands: Zhenxin Melon Seeds and Qinqin Jelly. "They only had the trading company segment, and the team had only 7 people. After I took it over, I expanded the personnel and effective outlets according to the approximate scale of my original team." The performance of cooperative manufacturers subsequently grew, and Yi Dianlong gained more recognition. Yi Dianlong told the author that through the first two M&As, he had already established a foothold in channels. The third M&A mainly supplemented the scale, and comprehensively improved business personnel, logistics and distribution, and other aspects. The idea of M&A came from 'Romance of the Three Kingdoms'. Yi Dianlong shared, "Liu Bei successively allied with many warlords before gradually establishing the Shu Han regime. In fact, fighting wars is like doing business. If you are not strong enough, then unite with other forces! " Three Difficulties in M&A: Managing Accounts, Managing People, Managing Distribution Distributor M&A is not a simple addition of the two, but a multi-dimensional and multi-level overlay of finance, organization, logistics, management, and more. The process is complex and naturally encounters many problems. 1. Accounts Receivable: Too Many Debts, Hard to Collect and Calculate Yi Dianlong believes that the biggest difficulty in the M&A process is accounts receivable. The first company owed 2.8 million, the second owed 1 million, and the third owed 1.5 million. Among them, 10% of the money could not be recovered, and during the handover process, store owners often ran away. "There are also some customers who only recognize the original distributor. In such cases, we had to find the original company's boss to solve it together," Yi Dianlong recalled. The management of accounts receivable is related to the lifeline of the company's development. To solve this problem, Yi Dianlong set up a corresponding payment collection management system. "We adopt a monthly settlement with a three-month reduction management method. For example, if it is now July, April's IOUs are no longer allowed. If the period exceeds three months, the salesman's salary will be used to offset the debt. If the salary is insufficient, his supervisor and manager will share the responsibility." With a level-by-level accountability mechanism, the problem of accounts receivable gradually decreased. Of course, special circumstances are still handled humanely. "You have to be flexible. Some store owners may not be willing to sign a payment agreement. In such cases, a chat record with the other party's promised date is also acceptable, and the finance department will grant a corresponding extension, so the salary will not be deducted. " 2. Personnel Management: After M&A, Morale is Unstable "I have also worked for others, and I know what everyone worries about: first, they are afraid that after I take over the company, I won't need them; second, they are afraid that salaries and benefits will be reduced." To this end, after each M&A, Yi Dianlong first explains clearly to the employees: First, we will not let anyone go, but will work together to make the company better; second, everyone's treatment will only be better than before. In terms of job settings, Yi Dianlong divided the team into different segments through splitting and reorganization: trading, logistics, finance, warehouse, etc. The businesses of several companies are interconnected and mutually responsible. This way, it is convenient for employees to find positions where they can realize their value, and it also forms a complete model in structure. In terms of salary settings, each company adopts the same formula of 'base salary + commission + performance assessment'. "The assessment is relatively detailed, such as the placement rate of key items, product display, return rate, etc.," Yi Dianlong introduced. "However, we rarely deduct; most are executed in the form of rewards. For example, if you complete 60% of a certain task, you get a certain bonus; if you complete 80%, you get another bonus." "In fact, the core is one sentence: You have to make employees feel that following you can earn money and see hope! " 3. Logistics and Distribution: Comparing with Each Other, Unwilling to Run More After integration, new problems gradually surfaced: logistics drivers became more competitive. "No one used to care about these things, but now that the delivery volume has increased, they compare which route is good and which is not," Yi Dianlong analyzed the reasons: "Due to various restricted sections such as morning rush hours and one-way streets, running within the city is indeed more difficult than running around the city's periphery." Last year, Yi Dianlong came up with a new trick: rotate routes, once every three months, ensuring each driver is familiar with at least 3 to 4 routes. At the same time, he divided the drivers into three groups, each equipped with 4 to 6 vehicles. Team members learn from each other, ensuring that the collection and delivery items originally handled by each are now handled by everyone. This avoids the problem of 'if one driver takes leave, no one can deliver his goods', and also seeks a balance that everyone is satisfied with in transportation. Good Partners Are the Basic Prerequisite for M&A Distributor M&A is not a simple process, especially the target of M&A is very important. If chosen improperly, it can lead to a lose-lose situation. Looking back on the three M&A experiences, Yi Dianlong summarized two suggestions: 1. Choose partners you know well. "I offered each a '1+20%' condition. For example, if the business value is 2 million, then I would offer 2.4 million." It wasn't that he had abundant funds at the time, but that the partners Yi Dianlong chose had been known to him for years, and after years of observation, there was a certain foundation of trust and room for negotiation. Similarly, in the eyes of the other boss, people who understand this industry may not be willing to invest so much money and take great risks; while those who don't understand the industry cannot do this job. M&A is also a mutual fulfillment. "If we don't know each other well enough, the other party may hide some matters, such as debt disputes or bank loans. This situation may only be discovered at a certain stage of M&A, so you must do your homework in advance." 2. During M&A, don't lose sight of the big picture for small gains. "There are many trivial matters in the handover process. If you don't have strong tolerance, it will be difficult to merge. For example, some distributors may want to sell you everything just to make more money." Obsolete equipment eliminated, temporary goods with price hikes... these can all become potential points of contention during the handover. When merging, distributors should weigh gains and losses. If there is value, keep it; if there is no value, make it clear. Of course, there is also a principle: if you have decided to merge, don't care too much about small gains and losses. Take a step back, and you'll see a broader horizon. Final Thoughts Under industry trends, M&A has also begun to become a choice in the plans of many distributor bosses. By leveraging complementary strengths or strong alliances, M&A can not only help companies optimize product portfolios and achieve cost reduction and efficiency, but also enhance their influence from multiple aspects to cope with the current competitive landscape and industry changes. Compared to groping and accumulating from 0 to 1 alone, M&A is also one of the good strategies to gain a firm foothold in the arena. Of course, no matter which path you take to Rome, improving your competitiveness and gaining more say will be an important topic for distributors to break through in the future.