Mastering M&A: Procurement's Vital Role in Successful Business Deals
Mergers and acquisitions (M&A) are expected to rebound, following a year of sparse deal activity.1 While M&A is typically associated with corporate and finance strategies, the procurement function plays a crucial role in ensuring success. From a procurement perspective, M&A often presents opportunities to enhance purchasing power, expand into new markets, and streamline operations. Consequently, companies can increase competitiveness and profitability.
Of the $2 trillion spent annually on acquisitions, an estimated 70–90% fails to deliver the anticipated results.2 How, then, can procurement influence the final terms of an acquisition and ensure better outcomes? ProcureAbility’s proprietary roadmap highlights where procurement can make a significant impact on upcoming transactions.
Conducting due diligence
Procurement teams are often tasked with conducting due diligence to evaluate potential savings and supply chain benefits during a merger or acquisition. During this discovery phase, they should review the target company’s spend, supplier contracts, relationships, purchasing processes, and supply chain synergies or challenges.
For example, they should:
- Evaluate supplier relationships across both organizations to identify areas for consolidation.
- Determine supplier importance and align with a single provider for comparable products or services. This helps eliminate duplications and negotiate favorable terms to establish preferred suppliers.
- Assess and mitigate procurement risks arising from the deal, including supplier disruptions, contractual issues, or regulatory compliance.
Staffing up
Supporting successful integrations
Top Recommendations
Strategic Contract Separation Plan
Contractual Review and Analysis
Restructuring for Alignment
Revisiting technology infrastructure
M&A integrations often require significant IT changes, presenting an opportunity to assess procurement digital tools and plan for long-term innovation. Consolidating functions can foster collaboration, improve supplier relationship management, and enhance market responsiveness.
It is crucial to evaluate the technology landscape and determine the most effective approach for consolidating tools and applications. Standardizing processes, implementing consistent tools, and leveraging analytics drive efficiency and produce data-driven insights for sourcing decisions. Additionally, streamlining technology reduces support needs and offers potential cost savings in the future.
Positioning change as opportunity
Stakeholders affected by an M&A deal may be vulnerable to leaving the organization. Therefore, proactively managing change is essential. Clear communication, detailed planning, and training encourage ownership and collaboration, supporting a smooth transition.
Ultimately, procurement is central to addressing integration challenges and maximizing value. By aligning goals, simplifying systems, standardizing processes, and leveraging best practices, procurement ensures the new organization operates efficiently and effectively.
Author:
Director of Talent, ProcureAbility
Contributor:
Kathleen M. Pomento, Chief Marketing Officer, ProcureAbility
References:
1 Morgan Stanley, “2024 M&A Outlook: Ready for a Rebound“ 2 HBR, “Don’t Make This Common M&A Mistake”