Could the Office Supply Merger Create a B2B Spinoff?

In the wake of the merger thought to be named “most likely to succeed,” it appears that Office Depot and Staples may still have some work to do to convince regulators that no antitrust laws will be jeopardized. Boston Business Journal reported that the Federal Trade Commission (FTC) is subpoenaing some of the suppliers’ customers. This has prompted experts to wonder whether or not the FTC is attempting to thwart the merger. Yet, in another article published by Wall Street Journal article, the reporter said the extra scrutiny doesn’t mean that’s the case. In fact, the FTC has done this sort of thing before. So which side of the coin will it be? As all of us at Expense Reduction Analysts patiently wait for the official outcome regarding the merger, the implications on the commercial industry weigh heavily on our minds.

Bids and Benchmarks

While the office supply retail sector has had plenty of problems, it has been consolidating to gain efficiencies. However, the B2B segment is still highly fragmented. As such, we suspect that one of the greatest obstacles to the Office/Staples merger will be the lack of competition for large clients in the commercial sector. After all, how will Fortune 500 firms, which competitively bid their national and global office supply agreements, have a true benchmark if the merger takes place?  It’s not realistic to think that these firms would simply tell their office managers to surf the Internet or check out Amazon for supplies. These large firms rely on a dedicated support staff, long-term pricing agreement, and large account incentives to find the best office supply rates. Unless an online marketplace like Amazon quickly sets up a large account service, this Office/Staples entity will be the only large, full-service option.

Spinoff for Sales and Support?

One of the possible outcomes of the extra FTC scrutiny could possibly be a spinoff of the commercial sales/support section for both Staples and Office Depot. However, the challenge of forming such an entity would lie in the logistics integration between the retail and commercial segments. In the move to simplify, there would undoubtedly be duplications and inefficiencies that would offset some of the savings. Still, we wonder if the spinoff could yield a productive longer-term solution. Only time will tell what the FTC will decide. As always, we’ll follow the potential merger activity to the smallest detail, and continue to guide our clients toward their best strategy. 

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