Best Practices for M&A

A supply chain check list for successful mergers and acquisitions


Don't Underestimate the Data Challenge

From a supply chain perspective, the potential synergies from M&A activity could come on the fulfillment and logistics, or distribution, side of the business or on the sourcing and procurement. In either case, a successful evaluation of the synergies will depend on the quality of the data available to the supply chain team, says Robert Babel, vice president of engineering at Forte Industries, a distribution supply chain consulting and engineering firm that has worked on numerous M&A projects for its clients. "You need to be able to get good data from both companies," says Babel. For companies looking to combine distribution operations, Babel continues, "hopefully, they both have good order history, good movement history for all the different SKUs they're going to be working with. You need to be able to roll all that together to see how the companies are going to work together as one." If the two companies ship similar products to common customers on similar terms, for instance, it may be relatively easy to consolidate order processing operations into a common distribution center and a shared outbound supply chain with little or no disruption to the customers. On the other hand, if the products are sufficiently dissimilar, or the customer bases sufficiently distinct, it might be best to keep the two outbound supply chains completely separate, at least in the near term. That could avert service level disruptions that could hurt the business in the long term, regardless of what cost savings could be achieved by combining two dissimilar fulfillment operations.

The challenge, of course, is being able to collect, collate and cleanse the necessary data from all the disparate systems in use at the prospective merger partners, and to do it in a way that makes a sensible analysis possible. "Just getting a normalized set of data is the first challenge," says Tanowitz. "Some companies might tell you that they have a very low cost for transportation, and that may lead you to think that one particular distribution network is more efficient than another. But then when you look at the data, you realize they're capitalizing transportation in the standard cost of their goods. They show no transportation expense, but that's really not the case." So while a company may be able to use Business Objects, Cognos, Hyperion or another query tool to collect the data, Tanowitz continues, "the hard part is trying to identify the person in the organization who understands that chart of accounts and account coding structure that will get you to the separation of the data to tell you what you want to know."

Supply chain solutions can be valuable tools for collecting these data, particularly when timelines are tight, as they typically are in M&A situations, says Andrew Kinder, director of product marketing for supply chain management at enterprise solution provider Infor. "From an IT perspective, people often focus on core back-office systems, and there's usually a three- or five-year plan to rationalize those systems," Kinder says. "But from a supply chain perspective, you can't even think about a long-term vision. You need visibility into key aspects of your supply chain — demand, supply, global inventory, transportation — and you need it quickly. This is where supply chain solutions come into their own, because they can overlie on top of multiple backend systems. An advanced planning solution can sit on top of these systems, collecting information, produce a new plan and pass it back into those systems so that the companies can carry on with their day-to-day business."

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