3 Steps to Surviving M&A

It's all about harmony


While companies can compare lists of suppliers and what their average total spend is, they cannot compare contracts prior to the merger being finalized unless the suppliers agree to it. Most suppliers have confidentiality clauses in their contracts that prohibit buyers from sharing the terms of the agreement with other parties. This protects suppliers from price wars. For example: Company A is acquiring Company B. Prior to the merger Company A learns that Company B pays a mutual supplier 10 percent less than Company A for the same services. The two companies decide to not go through with the merger. Now Company A is armed with information it received from Company B about pricing. Company A puts the pressure on the supplier to receive the same deal, which no doubt comes at a cost to the supplier.

Many companies reap the benefits from harmonizing agreements within the first three months following a merger or acquisition. In some cases it can take up to six months to realize the full benefits. This timeframe can change based on how much experience the involved parties have with harmonizing agreements, and how much legwork was done in advance of the final signing.

 

Bookmark and Share

Harmonizing Processes

As companies move on to evaluating the processes in place, they may choose not to harmonize. In some cases it is better to leave operations separate for the sake of continuity. For instance, one company may use payment cards, while the other not; one requires purchase orders, the other one not. The parties involved need to take a close look at which processes work, which need improvement and which can be eliminated. From there they can determine which culture will be followed and set a timeline for merging the cultures (if they choose to).

As with harmonizing agreements, some of the legwork can be done before the merger is final. Both parties need to look at what processes they are using and map out how the systems interact and what data points are being collected from those processes. This roadmap will be essential in determining the best course of action for addressing processes.

Harmonizing processes isn't just about the physical systems and how work will be handled. It is also about the individuals and the roles they will play in the new organization. Companies need to understand the pecking order within the company in regards to management and approvals. While titles may not need to be changed — such as manager to director — there needs to be a clear internal mapping of what each position is responsible for, who is being reported to and what authority each role has.

Other questions that need to be taken into consideration are:

  • How will financial roll-ups be handled? Will charts of accounts be merged and when?
  • Who is managing the risk portfolio for the supply chain and how?
  • Who is in charge of the continuity of business plan and alternate sourcing?
  • Is there a disaster recovery plan in place?

Post-merger, companies need to know where their risk lies and need to understand the supply chain's dependencies on any given supplier. This can be accomplished by creating a single repository for all suppliers. We recommend cross-referencing suppliers with their D-U-N-S® number; this will help to identify all supplier relationships and remove duplicate entries in the files being merged.

Companies typically start harmonizing processes approximately three months after mergers. It can take six to nine months to complete this step depending on the size of the deal and the companies involved.

Harmonizing Systems

There are essentially two schools of thought as to how to harmonize systems, and both have their pros and cons.

First, companies can choose to place everyone on a universal platform. This will allow for seamless integration and, ideally, better communication across departments. This approach does, however, have its drawbacks. It likely will cause disruptions, especially for those that need to make the switch to a new platform, and could result in costly downtime while the change is being made and training is in progress. Companies need to weigh the potential disruptions against the value of merging the systems and determine the best course of action.

The second option is to leave the systems completely separate. Very often, this can be the most beneficial route to follow. It allows users to continue working with systems they are familiar with and leads to minimal disruptions and time needed for training. The challenge with this approach is determining how to manage and build a data warehouse between two disparate platforms that allows the company to easily view the data. We recommend employing a solution that allows companies to compare disparate information and manage duplicates in the system.

  • Enhance Your Experience.

    When you register for SDCExec.com you stay connected to the pulse of the industry by signing up for topic-based e-newsletters and information. Registering also allows you to quickly comment on content and request more infomation.

Already have an account? Click here to Log in.

Enhance Your Experience.

When you register for SDCExec.com you stay connected to the pulse of the industry by signing up for topic-based e-newsletters and information. Registering also allows you to quickly comment on content and request more infomation.

OR

Complete the registration form.

Required
Required
Required
Required
Required
Required
Required
Required
Required
Required
Required