Post Acquisition Integration: Driving procurement synergies and improvements across five business units
CEOs with experience in doing mergers and acquisitions are all too aware that the real challenge often begins after the deal closes and they turn their attention to the work that's needed to drive the expected value from their acquisitions. Success is governed, less by what you buy, but by what you do with it after you've bought it and how well you do it. In our experience, most acquirers want to integrate the businesses as fully as possible in order to save costs, develop synergies and generate value for shareholders. The scale of this task is frequently underestimated. There is no one-size-fits-all solution that can be applied when you are contending with disparate business units each with its own unique, often firmly entrenched culture and systems.
Take, for example, procurement. This is, without doubt, one of the most essential functions to the success of any M&A. Alignment of a strategic procurement strategy to business strategy and ensuring that you have the right people, with the right skills, to move your procurement function up the procurement maturity curve is key. Cross-functional teams led by procurement can achieve synergy savings, identify competitive opportunities and add value by providing additional 'eyes and ears' for the organization in the supply market.
A good illustration of the value that can be gained from successfully integrating and aligning procurement synergies is our recent engagement with a client that was struggling to align the procurement functions across five separate business units. Although the business overall was performing adequately, each unit had its own unique operating practices creating latent value in an organization experiencing good organic growth and completing strong, strategic acquisitions. Procurement was division-centric, not fully represented in the leadership team, and four of the five units had no strategic sourcing process in place. Executives knew that they needed to develop one integrated procurement process capable of delivering EBITDA value but lacked the internal resources to achieve the measurable transformation.
With proven expertise, we helped the client consolidate five entities into one high-performing strategic procurement function, reduce direct material costs by 6% and, from a revenue enhancement perspective, identified a new revenue opportunity that will deliver a 4-6% improvement in revenue for the client.
Click here to find out how we did it and delivered a ROI of 4:1 in year one leading to 6:1 in year two.
As specialists in procurement, logistics and operations, we know that there are cost savings to be found almost everywhere in the key areas of your value chain. Not only that, we have the experience, methodology and capability to deliver significant savings and help clients move up the maturity curve to achieve Total Value Optimization™.
Find out how Maine Pointe can help assess your operations and implement improvement projects that deliver fast and compelling economic returns.