Executive Briefings

Supply Managers Bring Great Deal of Value to Any M&A Transaction

As strong companies emerge from the recession, they look for growth opportunities. Some will find growth through mergers and acquisitions activities. M&A activity rebounded nearly 25 percent in 2010 from the last two years' reductions. This is good news for companies with healthy balance sheets. It's even better news for supply management organizations. The success of many of today's M&A agreements depends on the end-to-end involvement of supply management professionals. And history demonstrates why.

Acquisitions are risky. Studies repeatedly report that more than half of all acquisitions fail to deliver target returns. Too often, the goal becomes simply completing the agreement, not negotiating a workable arrangement that will deliver better performance from the combined company that results from the merger. Supply management's value in M&A initiatives often pays for itself - every dollar of supply savings delivers profit equal to $10 to $20 of "revenue growth synergy." Hewitt Associates' M&A and Human Capital Keys to Success - Global Report 2009 notes that in today's tough economic conditions, the majority of acquirers focus on cost reduction as the primary means to a financial return. Further, 80 percent of companies "always" use cost reduction as a measure of success for M&As. Given the amount of cost supply organizations manage, they are key to delivering M&A synergy.

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As strong companies emerge from the recession, they look for growth opportunities. Some will find growth through mergers and acquisitions activities. M&A activity rebounded nearly 25 percent in 2010 from the last two years' reductions. This is good news for companies with healthy balance sheets. It's even better news for supply management organizations. The success of many of today's M&A agreements depends on the end-to-end involvement of supply management professionals. And history demonstrates why.

Acquisitions are risky. Studies repeatedly report that more than half of all acquisitions fail to deliver target returns. Too often, the goal becomes simply completing the agreement, not negotiating a workable arrangement that will deliver better performance from the combined company that results from the merger. Supply management's value in M&A initiatives often pays for itself - every dollar of supply savings delivers profit equal to $10 to $20 of "revenue growth synergy." Hewitt Associates' M&A and Human Capital Keys to Success - Global Report 2009 notes that in today's tough economic conditions, the majority of acquirers focus on cost reduction as the primary means to a financial return. Further, 80 percent of companies "always" use cost reduction as a measure of success for M&As. Given the amount of cost supply organizations manage, they are key to delivering M&A synergy.

Read Full Article