roll up, roll up


Staples’ recent purchase of Hartford Office Supply has caused quite a stir in the independent dealer community. Many wonder if the deal will herald the next phase of dealer roll-ups

When a $13 billion US company swoops on a small homespun business you wouldn’t necessarily expect too many ripples in the pond. However, Staples’ acquisition of the 50-year old Hartford Office Supply has certainly got the independent dealer community talking, even if the deal hasn’t caused too much of a commotion among the Wall Street glitterati.

The question is whether we stand at the precipice of the kind of dealer roll-up not seen since the days of the late lamented USOP.

For its part, Staples says the move is "in line with Staples’ stated strategy to find high return opportunities that complement our existing operations".

The power player has wasted no time in sucking Hartford into Staples Business Advantage, where it will bring in around 3,000 new customers in Connecticut, Rhode Island and Massachusetts. Following the deal, rumours circulated that other power players could be looking at similar purchases and that Staples itself may have bought Hartford to prevent it from falling into the hands of a rival.

However, this is firmly denied by Staples’ Jay Baitler, EVP of the contract division, who says: "We have absolutely no indication that other potential purchasers were involved in Hartford and never react on the actions of our competitors, but rather on what’s best for our associates, customers and shareholders." Baitler also denied that the geographic proximity of Hartford was the key driver for the acquisition. He adds: "The location of Hartford was nothing more than fortunate. There were much more important factors such as the strength of its people, stable management and great long-term relationships with customers."


Nevertheless, the independent dealer community remains split on just how to read this development.

BPGI CEO Jim Preston says: "I believe it is fair to say that the dealer community was surprised by the acquisition of Hartford. It was due to the size of the dealership and the profile of [Hartford chief] Charlie Cleary who is chairman of TriMega. However, when you look at the facts, it wasn’t a shock as the owners of Hartford are not active in the business and had an opportunity to monetise their investment."

Preston adds that he is "sorry" to see a high-quality dealership being purchased by a power player but does not see a dealer roll-up being sparked. "We are seeing small dealers being purchased by mid-size dealers and some selected dealers being purchased in Europe and Australasia, but we are not seeing any signs of the next big round of roll-ups," Preston adds.

Impact Office Products’ Ed Walper believes the sale of Hartford is particularly interesting due to the involvement of Charlie Cleary. "Charlie was chairman of TriMega, so you can’t have a greater impact on the independent channel than his being swallowed up by the power channel," Walper says. He adds: "It is clear that Staples, OfficeMax and Office Depot are pushing hard to establish a real foothold in the mid-market."

Walper believes that the US north-east will be the theatre in which any acquisition war will take place. He explains: "In the north-east US alone, there is quite a concentration of independent dealers. These folks may be studying the lay of the land and assessing their ‘chances’ of survival if the big guys really get focused. These are the seeds of some sort of acquisition binge." Walper believes a power channel assault on the independents is indeed coming, but also sees the possibility of it being tempered by the views of the financial markets and shareholders. CEO John Kreidel also believes that the power channel will eye independents again. He says: "We have believed for several years that history will repeat itself and more dealers will sell to the big boxes. Why? Like Hartford, many dealers do not have succession plans in their dealerships. The larger dealers in strategic markets will be approached as the big boxes must show Wall Street growth.

"This issue was recognised by our board and that is one of the reasons we launched our distribution system to strengthen the remaining independent dealer community by working with our manufacturer partners. We encourage our members to plan for the successful transition of their businesses, but we do understand that there will be more dealers sold."

However, Kreidel is keen to urge caution to any independent eyeing a sell-off. "As someone who was in a minority shareholder position and who sold his dealership to a big box player, I hope the dealers really think about what they are doing before they sell," he explains. "I’ve spoken to a few lately who are considering selling out, and after we chat they have serious second thoughts."


Chuckals Office Products VP Al Lynden is another who believes the power channel will look to acquire more dealers to help it become stronger in "our sweet spot" but believes there will not be the kind of feeding frenzy previously witnessed.

He adds: "I think that there are a lot of people saying one thing publicly (diluting the independents’ pool etc), while at the same time secretly wishing it was them. If I was in Hartford’s marketplace right now, I would look at it as a great opportunity. There is a reason a lot of our customers deal with independents, and now some of Hartford’s customers will be looking for an alternative. This business will continue to attract new and innovative dealers, while at the same time others will sell. It isn’t good or bad…it just is!" CEO Tony Ellison and Oak Tree Office Supply CEO Jerry Bedrin believe there are no firm signs of an imminent dealer roll-up.

Ellison says: "The power channel is continuously looking for smart acquisition targets, specifically in those markets where they cannot readily penetrate business. Driven by growth prospects set by Wall Street, it would be very difficult to overlook an opportunity when it presents itself. I believe that there is no more activity in particular nor is this an inclination of another roll-up."

Bedrin adds: "I don’t think it is significant at all. You have many good, strong independents that you will see acquire other smaller companies. I personally would like to buy another three, four or six million dollar dealer. I guess the folks at Hartford just felt the time was right."

As it stands, Staples’ purchase of Hartford has created a stir but ultimately a ‘wait and see’ scenario. The next move could be crucial. Should one of the power players swoop on a monster dealer, such as a WB Mason, then we really would see the sparks fly.