Understand what the transaction means for customers.

Your PCB supplier has been acquired. Will this acquisition benefit you as a board buyer? Or will it lead to higher prices and a reduced level of service?

 The answer may depend on how you react.

Vendor acquisitions can cause supply-chain disruptions, especially when the acquiring firm has a competing product line. What is troubling about these transactions is few PCB buyers seem to understand the real economics involved, or why they happened in the first place and what it means to them as customers.

Acquisitions usually fall into two categories: Either the acquiring firm buys the present customer base and its revenue stream, or it acquires some leading-edge or dissimilar technology of the acquired supplier – like a rigid supplier acquiring a flex manufacturer, for example. Either way, the goal of the acquiring firm is to catapult its sales efforts.

Interestingly, PCB suppliers that both manufacture and broker – whether in the US or abroad – may build boards for one another and broker from each other. Many board buyers don’t realize how much overlap there is among manufacturers.

And that means, more than likely, when a similar supplier buys another, the acquisition is an attempt to grab a greater share of the market, rather than to accelerate an innovation strategy.

For the customer, the question is will they benefit? In practice, the relationship with the supplier and the level of service received is likely to change. What should you do to protect your business?

You should oversee your supply chain, not your supplier. While you may not notice changes in your relationship with the acquired vendor right away, you should take a close look at your PCB purchasing process.

Don’t wait to be visited by the new supplier team, especially if the acquired firm was a big part of your PCB spend. Request a meeting sooner rather than later. Pay attention to how receptive the new supplier is to the meeting and be ready to ask many questions to get the lay of the land.

Try to ascertain where your orders stand with the larger entity. What often happens when a larger supplier swallows a smaller competitor that builds similar product is customers immediately become smaller fish in a bigger pond. What was 5% before may now be only 0.5%. Ask the new entity what percentage your sales represent for them. The larger the percentage of business you have with the acquired vendor, the better.

Will you still be considered a target account for the larger vendor? Will the potential for superior PCB buying power of the large entity offset your company’s (potentially) reduced significance?

Realistically, you are unlikely to have as much leverage as you once did on pricing and service. In fact, the newly enlarged supplier may even raise prices to politely shed customers no longer seen as desirable.

Plan on personnel changes happening after a merger, so ask now how the new vendor intends to ensure a smooth customer service transition. The support staff you’ve worked with for years may be laid off to avoid duplication of costly services. The supplier’s sales representatives may now operate under a different incentive structure that makes their relationship with you less important. Or sales reps may be let go because the acquiring company already has a sales force in place.

Review any written agreements you have with the supplier and those with your customers. Do they contain a clause about changing possible subcontractors? Once a supplier is acquired, the new company is likely to try to move your business to PCB manufacturing locations that support its business operations, not necessarily to those best for your orders. Because of your customers’ specific requirements, let the new vendor know which orders can’t be moved and get it in writing that they will comply.

Also, update and review whether the new entity can maintain the nondisclosure (NDA), hold harmless, and service level agreements you require. Are payment terms the same? Delivery times? What about the RMA process? Does the new entity have a different warranty policy? Who is in charge of quality? And be sure to give them a copy of your most recent PCB fabrication spec. (If you don’t have a fab spec, make it a priority to create one.)

In addition, develop a Plan B, especially if both vendors were supplying your company PCBs prior to the acquisition. Instead of two companies competing for your orders, you now have only one vendor who may not be as motivated to remain price-sensitive on your PCB orders.

Reach out to alternative PCB vendors for quotes, as they may be eager to give you price breaks and offer you a higher level of service, regardless of your annual PCB buy. At the very least, having an alternate source for your PCBs gives you more leverage with your new, larger vendor.

If the acquisition experience is not a good one for your company, cut the supplier loose by slowly migrating business elsewhere. Seek out other manufacturers. You can also bypass the broker altogether and deal directly with offshore manufacturers. That is now easier than ever before.

Either way, being prepared now will protect your PCB purchasing in the future.

Greg Papandrew has more than 25 years’ experience selling PCBs directly for various fabricators and as founder of a leading distributor. He is cofounder of Better Board Buying (boardbuying.com); greg@boardbuying.com.

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