After several years of woeful financial results and failed restructuring efforts, Adveo Spain and Calipage Spain have requested to enter liquidation.
The Madrid-based firm was reborn under the Adveo banner in 2012, following its enormous acquisition of office products wholesaler Spicers for around €210m and its 2009 acquisition of electrical office supplies distributor Adimpo.
At the time, it said the new "Adveo" name was synonymous with "dynamism, being alive and going forward."
Let's unpick what went wrong for Adveo, starting from the beginning:
Cementing leadership in low-margin product areas
I am not suggesting that a distributor can't build a successful business pushing low-margin products at scale. Just look at Westcoast in the UK, which last year grew sales by 16 per cent to £2.23bn (€2.54bn), or Italy-based Esprinet which hit six per cent sales growth to €3.22bn in 2017.
With its acquisition of Spicers, Adveo became the runaway leader in traditional and electrical office supplies, with total revenues of €1.29bn; leagues ahead of its closest competitor Alpha Office, at €534m.
But in order for a low-margin distributor to be profitable, it must be efficient and lean above all else. The Adveo of 2012 was an awkward mishmash of three separate businesses spread across six European countries, with an odd mix of traditional and electrical office supplies product lines.
Added to that, it had elected to become a leader in a market in which several of its key customers were entering tough times. Office Depot had just closed down its operations in Spain, while Staples had just shuttered its Belgium business.
And in a few short years, the industry's biggest players were beginning to come to the exact opposite conclusion as Adveo: that they couldn't rely on their traditional volume business forever. Tech Data announced plans to acquire the margin-rich Avnet TS business for $2.4bn in September 2016, and Esprinet boosted its value-added business through acquiring Itway just a month later.
But, effectively, it was Adveo's poorly timed acquisition of Adimpo and Spicers in quick succession that led to the single biggest disaster in its history, and the start of its decline…
Disastrous SAP rollout
Adveo's warehouse closures, employee layoffs and eventual plans for liquidation can all be traced back to its plans to roll out a new SAP platform across the disjointed Unipalel, Adimpo and Spicers businesses in 2015.
The SAP rollout, which was initially implemented across Iberia, was the main contributor for one-off costs totalling €59m, causing Adveo to sink to a net loss of €70m for the year. The financial strain forced Adveo to delay implementing the SAP platform across its other European operations.
The poor 2015 performance prompted a management refresh for Adveo. A new CEO, turnaround expert Jaime Carbó, was installed in September 2015, followed by a fresh CFO and CMO soon after. The new execs devised a business plan for the distributor for the next three years…
A flawed new business plan
In a nutshell, Adveo decided to move from a "traditional distribution" model to a "platform" model, which effectively meant it would begin selling directly to end-user customers in order to build a larger addressable market.
It quickly sold off its electrical office supplies business to UK-based Westcoast, meaning Adveo basically become a traditional wholesaler with revenues of €535m at a time when most other distributors had already moved into more margin-rich areas.
The distributor would take drastic steps to begin developing its own brands, building on its Pergamy range of products in an effort to reach direct sales of €67m by 2020.
But the new strategy ran the risk of putting Adveo into direct competition with its large reseller base, further muddying its role as a middleman between vendor and partners. Carbó later addressed this, claiming that the market was large enough for Adveo to sell to resellers and customers alike without conflict.
Adveo managed to reduce its net debt from €297.4m to €174.2m in the 12 months until 31 March 2017. But a failed deal with Netherlands-based Staples Solutions to acquire €150m of its debts plunged Adveo into pre-insolvency proceedings late last year.
Staff employment contracts for Adveo Spain and Calipage Spain have been terminated, with its overseas subsidiaries - in France, Italy and Belgium as well as Adveo Global Services - being salvaged by private equity investor Sandton Capital Partners.
The trading of Adveo shares on the Spanish Stock Exchange was suspended on 14 October, by which time its share value had fallen by 82 per cent in 12 months.
So what went wrong with Adveo? It sought to become the leader of a declining market and failed to adapt as quickly as the competition did.
Meanwhile, a new entrant in the Spanish market has picked up where Adveo left off. Esprinet is now one of Spain's largest distributors and its CEO Alessandro Cattani has since expressed an interest in moving in on Adveo's turf and selling office supplies, peripherals and IT accessories to Spanish customers.
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