Tips for buyers to make mergers and acquisitions a success

Procurement teams need to make a quick and proactive response to a merger and acquisition (M&A) to ensure success.

Rebecca Ellinor-IFPSM - עדכון אחרון: 10/01/2011 21:04:47

A report by Accenture, Making Mergers and Acquisitions Pay, said while the critical role of procurement in mergers, acquisitions and divestments is widely acknowledged, fully achieving these goals is far tougher than many companies think.

"Commonly sought synergies such as scale buys and purchase process consolidation often contribute between 25 and 50 per cent of targeted benefits… The big inhibitor [to this success] is often lack of awareness and expertise in key sourcing and procurement areas such as blending company cultures, harnessing global talent, integrating e-procurement systems and maintaining a 'business as usual' service for internal stakeholders."

Accenture's report provides six pointers to help procurement teams in merger-minded companies make a difference:

1. 'Ensure that procurement and the C-suite are on the same page'
To provide maximum value to the M&A effort, it is essential for procurement to ensure its objectives are in line with the goals of stakeholders in all other departments, the new entity's corporate strategy and the deal itself, the report said. "Procurement leaders need to make a formal effort to maximise procurement's relevance."

2. 'Get in early'
The report said research has shown early involvement by procurement is key to "realising the synergies that inspired the deal in the first place". Inadequate planning damages the chances of getting the most possible from the new arrangement.

3. 'Manage assertively and proactively'
Data analysis and opportunity assessments are the first steps procurement organisations typically take. These projects need to be well-resourced and managed from the start.

4. 'Benchmark procurement practices'
The report said that whether executives intend to integrate post-merger procurement teams, keep them separate, or have something in between, they must benchmark processes and performance.

5. 'Recognise the importance of culture'
It is likely that cultural and organisational differences between merging organisations will be encountered during the M&A process. These could include relative degrees of centralisation, extent of outsourced activity, key performance indicators, variations in the percentage of spend managed by procurement and the degree of involvement the purchasing organisation has over end-to-end sourcing.

6. 'Build the right procurement organisation in the right timeframe'
The report concluded that the 'right time' to start transforming the procurement organisation is as soon as possible. "Organisations that use the pre-merger diagnostic period to compare processes, supplier relationship practices and total acquisition costs, and then design new procurement operating models, are far likelier to achieve cost and cultural synergies," it said.

The study said that while some M&A activity had occurred despite the recession, and some because of it, more was anticipated in future. "Considering M&A activity over a longer period indicates that corporate marriage activity is cyclical, and this perspective suggests that M&A should reach higher levels in the near future."