Webinar Notes: Strategic Sourcing in Mergers & Acquisitions

This week’s featured webinar comes from the Global eProcure webcast library. If you are interested in viewing this or their other webinars, click here to select a webinar and provide some basic registration information to view.

As you would expect, companies going through a merger or an acquisition find themselves in the position of suddenly having two of everything. Regardless of how well each company managed their spend before entering into the new relationship, the duplication provides opportunities to re-assess and re-negotiate. The result should be one cohesive supply base that meets the needs of the newly-formed organization and recognizes categories where one company or the other had a leading strategy in place.

The webinar features main speaker Steve Bucalo, GeP’s Vice President of Energy and Utilities. He presents an overview of the role of strategic sourcing after a merger or acquisition and illustrates GeP’s recommended process with a case study. Watch the twenty minute webinar for more information on their key strategies, challenges and outcomes.

Leveraging the abilities of a strategic sourcing organization to restore efficiency looks much like implementing a new sourcing program: consolidate spend, assess opportunities, execute the sourcing plan, and track results through to the bottom line. The most interesting portion of the webinar was the description of how to break qualified sourcing opportunities into prioritized waves and how to match strategies to the groupings of projects.

Because there is a heavy focus on stakeholder or business-owner involvement from both organizations at all levels, GeP refers to the souring execution portion of the roll-out as ‘collaborative sourcing’. Within this stage of the effort there are three approaches:

Contract Harmonization – where the organizations have separate contracts with the same supplier in a category. The contracts should be reviewed so that the most favorable terms are put in place for the new combined organization.

Rapid Sourcing – where both organizations have contracts for the same category of spend but with different suppliers. In order to reduce the lead time to results, strategic sourcing projects are conducted with incumbent suppliers only.

Strategic Sourcing – where each organization has unique categories of spend without an overlap of suppliers. These projects can be given a lower priority immediately following the creation of the combined organization since they do not offer a benefit directly tied to the consolidated spend categories or supply base.

The above approaches may also be applicable where a large or global organization is moving from a decentralized purchasing model to a centralized one, at least to put contracts in place. A spend analysis solution will go a long way towards making the above possible, particularly the opportunity assessment, where the projects are divided into the approaches. Team members should remember that it will be necessary to allow time to integrate two solutions, as well to marry up each of their category structures or taxonomies into one data structure.