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Racks
12-04-2007, 05:28 PM
When a company is bought what are terms of Buy Out for their distributors? How do come up with a fair amount? Is it based on monthly gross etc?

greg
01-09-2008, 03:42 PM
When a company is bought what are terms of Buy Out for their distributors? How do come up with a fair amount? Is it based on monthly gross etc?

Usually it is 1x gross profit per case annually. If you sell 1000 cases a year and your GP was $4 per case then you would get $4000. Some are higher and some lower , however, industry avg is 1x Gross Profit.
It can be a leagl wrangle though because of what I like to call VooDoo math. The accounting methods in the beverage business that include scan downs, bill backs, free goods, returns credits, sale price vs. retail price, the list goes on.
It is best to establish upfront obviously in a contract.