Will a Tesco owned Booker spread wholesale payment term panic?

Hot off the press comes news of another big takeover deal; but will suppliers be quite as bullish?

Budgens and Londis are not names that have come in for any serious flak under the government’s limp wristed prompt payment initiative – yet…. Indeed, Google any permutation of parent company Booker and words such as supplier payments/treatment and nothing nasty appears.

So, for any business helping to fill the shelves of the UK’s biggest wholesaler of food to the catering industry and convenience store sector, cashflow may have been just about manageable over the last few years.

Wake up and smell the (own label) coffee

Worryingly, for those same suppliers, if Tesco’s proposed £3.7bn deal to buy Booker gets the go ahead they may find themselves selling to a business that has enjoyed a great deal of unwanted publicity over the same period for bully boy tactics and unreasonable payment terms.

Amongst other things the “merger” announcement document, available as a PDF from Booker’s website, promises suppliers “A broader market opportunity and an integrated multi-channel supply chain driving further efficiencies“ . With so much consultant speak going on you can almost hear someone shouting “House” as they complete the well known boardroom version of a bingo card.

It doesn’t however make any mention about how long suppliers might have to wait for payment under new management.

Cash and carry on

It’s the perennial conundrum for businesses at the smaller end of the scale; orders from a customer of undoubted creditworthiness but from one that probably won’t pay until well after the sell by date of the goods supplied. Add to that the horror stories of retrospective discounts and “contributions to marketing” and it all starts to look a lot less gilt edged.

The effect on cashflow and margins can pose serious problems for businesses already feeling the squeeze. Without a funding partner willing and flexible enough to bridge the gap between delivery and payment many wouldn’t survive or would just have to give up being banker to the blue chips altogether.

Echo chamber?

Of course these worries may well turn out to be unfounded and let’s all hope so.  Further comfort can also be taken by the fact that Theresa May called time on “irresponsible” corporates back in July 2016 with the subsequent publication of the Green Paper on Corporate Governance Reform.

And we all know how big corporates mend their ways when the government gets involved!

by Steve Leeves