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Overcome procurement challenges resulting through business expansion (M&A) - Part 1

Business expansion and growth, nowadays, through mergers and acquisitions are inevitable – Fact: 42 FORTUNE 1000 corporations were acquired in 2007, biggest buyout frenzy since 2000. Apart from managing the risk of workforce events and re-structuring (Human Resource Harmonization) caused by M&A, organization begins the journey with – “quickly integrate mergers and acquisitions into my enterprise processes and systems”. Talking about process consolidation and IT integration, Sourcing and Procurement processes and systems cannot be left behind. Please remember - Saving $1 in procurement equals $15 to $20 in revenue.

Procurement Challenges resulting through this Business Expansion of M&A is huge. First thing first - Multiple divisions in different countries with disparate processes and systems leading to inefficiency, little spend visibility across the organization, greater supplier variability, data management and different naming conventions multiply the complexity. Over the last 10 months, I was involved in consulting assignments with couple of Fortune 100 corporation post M&A – process unification in Contracts Management & Spend Analysis and system integration for S2P (Source to Pay). My initial thoughts – understand the process and systems followed / used by the parent company and roll it out to the acquired company. Lots of people endorsed my thoughts. Believe me, within few days, I realized that, it is big NO.
Sourcing and Procurement Process is very simple, everyone do it day in day out, as long as you know there is a BIG difference on the way you buy tender coconut and apple and from where you are buying that. But if you start comparing the way your wife buys the same item with the way you buy, I am sure you will realize how different it is. If you try to copy the way she does the business, you might not succeed. (Similar is the process comparison between 2 organization post M&A)Here are some tips (3 tips to start with) while doing the procurement process unification and system integration post M&A –

“It is far better to grasp the Universe as it really is than to persist in delusion, however satisfying and reassuring”. Though the parent company is big, in business for long time and has stable processes - that does not mean that the process and system can be copied exactly. As a consultant or system integrator, take quality time to grasp the process as it really is, map and match the processes with the parent company’s template, identify the “must haves”, build a business case to incorporate the must haves into the template and finally provide the best way to build this add-on. Copy intelligently is better than copy exactly. Look out of the Legal Entities Model – Your current supplier might become your affiliate later, your spend might be reported differently, your delegation of authorities might change and so on….Understanding the complete Legal structure and the legal implication will help you to construct the stable process and a rigid technical solution (just a note: I read somewhere – do not try to build a flexible solution, this means your process is not stable. Probably right)
TCM (Transition Change Management) – Post process design, trying to educate the end users on the newly defined process, I sometimes hear - we will follow the parent organization process. If the process is transactional in nature, probably okay. But the strategic players should know the reason for the change. As a process owner, I think it is our moral responsibility to explain why there is a change in the process and how to manage the change. Understand the problem that exists between chair and table and make sure that there are no big elephants in the room unnoticed.

Final thoughts, how many times we have heard – Change is the only constant. But in optimistic view, it happens only because you are trying to put the right process and people in place for success. Right process always does not mean world class process – it just need to be good enough for the business and YOUR business…



I agree with you on the points. One thing to be noted is building templates and mapping with the merged / acquired entity would be considered as an easy task compared to the change management exercise. TCM starts even at the time of the Management level think tanks broaching the M & A talks. During and after the M&A exercise the intensity varies for the TCM exercise. Taking all the stake holders into confidence for rebuilding a process is much more complex and it becomes more complex when human interface increases. Good thoughts Raj.

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