Advice on Handling a Potential Supplier Acquisition?

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November 24, 2025

by a searcher from Ryerson University - Ted Rogers School of Management in Toronto, ON, Canada

Hi all — I did not go into my search intending to buy a plant or a manufacturing facility. But due to some recent developments, I discovered (indirectly) that a key supplier from my operating ecom brand may be exploring a sale. (I saw a teaser, signed NDA, broker did _not_ send CIM but sent me some pre-qualification questions first, from which i realized that the target is ...my supplier!) This puts me in a tricky position as a potential strategic buyer: On one hand, acquiring the supplier could de-risk my supply chain, improve margins, and give me long-term control over production. On the other hand, it’s a labor-intensive, onsite manufacturing operation (20+ employees, rural location), and it's barely profitable (less than 10% SDE margin) There’s also the question of seller expectations — the broker is anchoring at a very high multiple for the size and industry (he said seller wants 10X SDE) and that a relocation is a must. (From the way the current owner conducted business with me, it is obvious that he runs everything) And I have to be very careful not to disclose that I am a current customer or dependent on them, to avoid weakening my negotiation position. My dilemma: WTF do I do in this situation? It's one of my key suppliers and if they sell, new ownership might not bother with my business (it's a tiny fraction of their overall rev). Not deadly, but will sting. And pursuing this deal with this type of seller and this thin of a profit margin also looks risky. (Not to mention how to navigate the NDA i signed with the broker vs. my existing supplier relationship) Any advice, frameworks, or cautionary tales from the community would be hugely appreciated. Feel free to comment publicly or DM if you’ve gone through something similar. Thanks in advance.
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Reply by a searcher
from Charter Oak State College in New York, NY, USA
Hi Greg, You are seeing behind the curtain here. A thin margin, an owner who runs everything, and a sudden teaser usually means the business is wobbling. A ten times SDE ask is pure fiction. If you are any meaningful part of their revenue, you have leverage. Do not let the broker box you in. And if this supplier truly matters to your brand, call the owner directly. Have an honest conversation. No broker. No theatrics. Just two operators talking about what is real. Before you go any further, make sure you have a backup supplier. If they go under, you do not want your entire product line hanging in midair. Then run the numbers cold. Buying a supplier is not about their profits. It is about your margin and your control. Does owning them actually cut your COGS? Does it stabilize your future? Or are you rescuing a plant that will drain you faster than it helps? Also ask the hard questions nobody asks at the beginning. Are there better suppliers out there to buy? Is the equipment outdated? Is the workforce trainable? Are you inheriting regulatory headaches that will choke your time and wallet? If the deal strengthens you, pursue it on your terms. If not, walk. No need to carry someone else’s sinking ship just because you happen to buy a few pallets from them today.
commentor profile
Reply by a searcher
from Emory University in Tucson, AZ, USA
The "WTF" is telling you all that you need to know: this isn't the deal or direction you want to take your business - at least not at these economics, complexity, location, etc. Now that you are aware of the the seller's intention to exit, it gives you time to diversify your supply chain for resourcing opportunities and/or invest in growing new products, categories, etc. that can weaken the blow should you lose the company as a supplier. The seller's expectations may also work in your favor as it is likely to sit on the market longer giving you more time to explore alternatives while also giving the broker an indication of your interest at a multiple that's based on economics, not desires.
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