Mergers and acquisitions (M&A) are major events in the life of any business, often seen as an opportunity to drive growth, expand market reach, and improve financial performance. However, the complexity of integrating two companies successfully requires more than just financial and legal alignment. Procurement plays a vital role in ensuring that value is maximised during strategic acquisitions. By involving procurement early in the M&A process, businesses can unlock significant cost savings, operational efficiencies, and long-term value. Let’s take a look at how we do it…
1. Identifying synergies through spend analysis
One of the key contributions procurement can make in an M&A transaction is the identification of cost-saving synergies between the two entities. A thorough spend analysis allows businesses to identify overlapping suppliers, negotiate better deals, and consolidate purchasing power. By assessing spend categories across both companies, procurement teams can provide valuable insights into where savings can be realised and contracts renegotiated.
For example, if both companies are sourcing similar materials or services, there is an opportunity to consolidate suppliers, leverage greater volumes, and reduce procurement costs. This level of insight can make a tangible difference to the overall value generated from the acquisition.
2. Streamlining the supply chain
An M&A deal often comes with challenges surrounding the integration of supply chains. Procurement teams play a crucial role in ensuring that supply chain operations are streamlined and that any disruptions are minimised. By working closely with suppliers from both companies, procurement professionals can ensure a smooth transition and avoid supply chain bottlenecks that could affect production or service delivery.Additionally, procurement teams can look for ways to optimise the supply chain post-acquisition by identifying inefficiencies, eliminating redundancies, and ensuring that the newly combined business has a robust, resilient supply chain.
3. Due diligence on supplier relationships
Procurement can also add value during the due diligence phase of an acquisition by reviewing supplier contracts and relationships. This includes evaluating the risks and liabilities associated with existing supplier agreements and ensuring that contracts are in line with the acquiring company’s standards.
A detailed review of supplier performance, pricing structures, and contract terms will help to identify any potential risks or opportunities for improvement. Procurement can also help to assess whether existing suppliers will continue to be suitable for the enlarged business or if new suppliers should be brought on board.
4. Ensuring compliance and governance
When two businesses merge, aligning their procurement policies, procedures, and governance structures is crucial to ensuring a successful integration. Procurement teams are ideally positioned to oversee this process, ensuring that the combined business maintains consistent compliance with regulatory requirements and ethical standards.
This includes standardising procurement processes, integrating systems, and ensuring that both companies follow the same governance protocols. This level of oversight not only reduces risk but also helps to create a more unified and efficient procurement function.
5. Creating long-term value
While cost savings and efficiency gains are important, procurement’s role in M&A goes beyond short-term benefits. By taking a strategic approach, procurement teams can help to create long-term value for the newly combined business. This can involve building strong supplier relationships, fostering innovation through collaborative partnerships, and ensuring that procurement practices align with the overall goals of the business.
In conclusion, procurement plays a critical role in maximising value during M&A activities. By focusing on cost savings, streamlining supply chains, conducting thorough due diligence, and ensuring compliance, procurement professionals can help businesses realise the full potential of their strategic acquisitions.
Mergers and Acquisitions: how a procurement consultancy can help
At Accelerate, our team of experienced procurement consultants support M&A teams in optimising value return, helping your business to grow and thrive. Our model helps us to engage with business development and M&A teams within an organisation to qualify potential acquisitions/divestments and optimise value return.
Our team can support through all stages of activity, including:
- Due diligence
- Synergy identification and prioritization
- Integration planning/execution
- Accelerated synergy realization
For Private Equity, our model supports profitability through portfolio companies (single or aggregated), with potential to increase investment opportunities/success ratio.
We can assist extended revenue streams by supporting the procurement processes and practices. If you are looking for support on the M&A process, get in touch today to see how we can help.