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A focus on procurement before a merger and acquisition (M&A) closes can reduce time to benefits and improve results.
Globally, M&A activity is on the rise. Although companies look at M&A to expand and enter new markets, most of them still view M&A as a path to achieve greater enterprisewide efficiency. As a result, the procurement function draws a great deal of attention, with companies aiming to shrink total cost of ownership by purchasing goods at lower costs and operating the combined procurement organization more efficiently.
Drawing upon our in-depth research and vast client experience, we recommend merging companies to work closely in a clean room environment to combine their purchasing power, rationalize contracts and purchases, define lowest-cost sourcing practices, and develop a plan for eliminating redundant activities.
Download the report to find out how a strong premerger focus on procurement can strengthen your M&A initiative.
Premerger efforts in procurement can yield significant benefits:
Increases procurement savings by up to 15 percent, with average cost reductions of 10 percent. The delivery of savings can begin up to six months earlier than cases where no premerger work is undertaken.
Improves the ability of decision makers to agree on priorities, thereby streamlining the entire merger integration process.
Enhances the visibility of the procurement function, with executive management focused on procurement’s contributions, and how to support and enhance them.
Boosts the ability of the newly merged organization to deal effectively and economically with suppliers from day one.
Premerger procurement efforts can bring in the desired results if companies:
Identify the areas that truly create value. Don’t try to improve or rationalize everything.
Insist on the best employees for staffing premerger and integration teams.
Become one team as soon as possible.
Create a centralized monitoring and communication capability—powered by analytics—to help the newly merged organization excel at various tasks such as reporting, governance and quality management.
Engage with suppliers after final merger approval in a structured way, with an agreed-upon negotiation strategy.
Companies can adopt a disciplined, multistage approach to premerger procurement:
Set up a clean room: Create a secure, legally compliant environment to access, share and scrutinize confidential information. Within the clean room, third-party advisors work with select decision makers from both companies to examine data in ways that comply fully with antitrust regulations.
Analyze total cost of ownership: Perform a total cost of ownership analysis that can help lay a foundation for negotiations that will happen when the merger closes.
Assess and reconcile contracts: Gather supplier contracts for both companies on separate, secured SharePoint within the clean room. These contracts need to be analyzed according to an extensive list of qualitative and quantitative criteria.
Identify synergy levers: Engage in actual planning by identifying synergy levers for each commodity.
Create an action plan: Translate the clean team’s identified synergy levers into specific initiatives such as compiling lists of suppliers or preparing bid documents.
Develop a new procurement operating model: Design a procurement operating model that represents the best of each organization’s previous approaches and reflects additional outside-the–box thinking.
Chart procurement processes and map the system landscape: Document the end-to-end processes of procurement functions of both companies, focusing tightly on rationalization opportunities, potential synergies and application of leading practices.
Lay a foundation for value tracking: Develop specialized value-tracking tools that help merging companies identify, quantify and maximize benefits associated with the merger.
Kris Timmermans is a managing director within the operations group of Accenture Strategy. He leads sourcing and procurement services. In the last 20 years with Accenture, Kris has led a large number of global procurement and supply chain transformations for companies across consumer goods, automotive, pharmaceutical, natural resources and chemicals industries.
Axel Savoye is a senior manager within the operations group of Accenture Strategy. He has 15 years’ experience in strategy and procurement, and has led various premerger and postmerger procurement engagements across different industries and geographies.
Armando Díaz is a managing director within the operations group of Accenture Strategy. He is responsible for all supply chain projects in Mexico, and has extensive experience in sourcing and procurement processes as well as leading transformational client programs in consumer products and resources industries.
Laurent Delsaux is a manager within the operations group of Accenture Strategy. He has in-depth experience in premerger and postmerger integration, as well as procurement transformation in Europe, Latin America and the United States. He has worked across the consumer packaged goods and chemicals industries.
April 28, 2014
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