I’ve written previously about why mergers have become such a popular growth strategy, including how our Business Focused Procurement approach can be pivotal in ensuring you maximise on the available benefits. Now I’d like to focus on how an empowered procurement function can add business value in a corporate merger situation.
Often an important objective of mergers between companies is growth beyond what each entity could have achieved on its own. Combining the strengths of each organisation accelerates the delivery of business value. If done effectively, it makes the impossible possible.
Ripple effect of procurement synergies
When organisations merge, so do their procurement functions. With the right vision and leadership, this represents an opportunity to create a new procurement function that is greater than the sums of the parts. This, in turn, creates a solid foundation for delivering more business value to the wider merged entity. Here are a few examples of value creation opportunities within the merged procurement function and beyond:
- Post-merger is a great time to take a fresh look at how the procurement function should be organised and how it should operate. Creating a new streamlined “best of breed” procurement organisation with optimised processes can take the function to the next level. Eliminating duplication of roles will also reduce Procurement’s operational costs.
- When mergers fail it’s often blamed on culture clashes. However, if culture differences are effectively managed, they can become a catalyst for added creativity and cross-learning. The insights that follow could lead to a more efficient supply chain, improved sourcing practices or innovative use of data. The importance of creativity was recognised by 1,500 CEOs in an IBM survey as the number one skill in dealing with a complex and ever-changing world.
- In addition to growth, a key motivation for a merger is often to realise “synergies”. An enhanced procurement function, as described above, can help turn these pre-merger expectations of synergies into reality. This can be done in several ways, including:
- consolidating supplier spend and removing duplication for greater negotiating power and lower costs;
- applying Total Cost of Ownership and Value Engineering methodologies; and
- Enhancing Supplier Relationship Management to gain early access to more supplier innovation
It may take some time for this value to materialise, but strong procurement leadership and a focused strategy will keep you moving forward.
If you’d like to find out how we can help you maximise the results you get from a business merger scenario, get in touch today.
