Key Takeaways

  • Winsupply runs a lean four-person deal team managing acquisitions across more than 680 wholesale distributor locations with an 80%+ success rate.
  • Greg Holbrock bans sellers from drafting bespoke diligence files, demanding raw, existing operational records instead to prevent manufactured metrics.
  • Winsupply factors only one-third of goodwill into local share prices, protecting future operating partners from carrying unserviceable debt burdens.
  • Deal teams kill transactions with attractive headline multiples whenever diligence uncovers cultural friction or defensive founder behavior.
  • Audit discipline requires tracing every financial adjustment across all models to catch compounded valuation errors before signing.

The Seller Journey Replaces the Checklist

Most corporate development teams treat diligence as an adversarial document request list. Analysts fire off spreadsheets with hundreds of line items, expecting founders to produce clean reconciliations on demand. Holbrock came out of internal audit, Sarbanes-Oxley compliance, and forensic fraud investigations. He saw firsthand how checklists create blind spots.

“Early on in my career when I kind of started in the diligence activities everything was like a checklist,” (play from 16:40) Holbrock said. “You know you're checking a box. You're kind of looking at some things but not really evaluating for it. Now it's trying to figure out how does this align with our current strategies or or certain industries.” (play from 16:43)

At Winsupply, diligence runs as an open walkthrough. The four-person team coaches owner-operators through every data request, explaining the operational rationale behind each question. Holbrock imposes one hard rule: founders must never build new reports just to appease corporate buyers.

“Anything we look for in in diligence is what have you already done? Don't don't create something just to consummate the deal. Let's walk through step by step. why are we requesting the data? What is it needed for?” (play from 17:42)

When a seller invents reports during an acquisition, they hide how the company actually runs day to day. Raw, imperfect operational files expose true inventory turns, messy customer concentration, and informal vendor terms. If a founder cannot explain their business using their existing numbers, a sanitized deck will not save them post-close.

Auditing the Ripple Effects Across the Deal

Holbrock treats diligence discrepancies as systemic warnings rather than isolated errors. In forensic accounting, an error in revenue recognition never sits by itself; it distorts gross margins, accounts receivable aging, working capital targets, and tax calculations.

“In an audit, if you have a finding and you have to go in later and correct it and you had a financial finding, you've got to go back and correct it in every place that you had that financial metric listed,” (play from 1:16:52) Holbrock noted. “And so a lot of people just think of the here and now, fix it here. But hey, did that affect another analysis that was done in another part that also needs to be fixed?” (play from 1:17:05)

This audit standard extends directly to human behavior. Winsupply skips rollover equity entirely. Instead, local operating presidents buy equity directly in their specific wholesale location, while Winsupply corporate absorbs two-thirds of the goodwill on its own balance sheet. Because the local manager must succeed as a minority shareholder, interpersonal red flags discovered in diligence outweigh financial upside.

“Winsupply walks away from a lot of deals that make financial sense we just cannot figure out how to how to make it work for that minority investor in the future,” (play from 15:19) Holbrock explained. If a seller becomes evasive or hostile when questioned about discrepancies, Winsupply pulls out. The deal team views diligence friction as an exact preview of post-close integration.

Why It Matters

In a higher-rate environment where debt will not bail out sloppy underwriting, diligence must function as a filter for post-acquisition execution rather than a legal exercise. Buyers who replace hostile check-the-box requests with collaborative audits uncover operational fraud earlier and protect local operating margins. Walking away from accretive headline multiples protects institutional capital from businesses that only look sound on paper.