Can mergers lead to world class supply chain organizations?

Date: 02/08/2016

The near collapse of our economy in 2007 set in motion a historic and sustained high level of merger and acquisition activity unrivaled since the Internet bubble at the end of the 20^th century. And while such activity dipped to around 1,000 separate deals this year, brace yourselves: according to the Institute of Mergers, Acquisitions & Alliances, the rate could nearly double in 2016.

As the oft-misquoted line in “All About Eve” goes, “Hold on, we’re in for a bumpy ride.” For purchasing organizations in those 1,800 or so expected mergers next year, this will present some discomfort and keen challenges. We spoke recently with Mark Trowbridge, principal, Strategic Procurement Solutions, LLC, coming off a series of presentations to groups of purchasing executives on the topic of navigating through mergers and reorganizations.

While savvy executives would do well to soldier through such transformative events with acumen and aplomb, the prospect of losing their jobs still weighs heavily. Job loss is twice as likely when such mergers occur among companies in similar industries, according to one leading business journal. Moreover, nearly half of merged or acquired purchasing staff surveyed by Accenture in 2014 said it took at least three months before they fully understood how such deals would affect themselves and their new roles.

But take a breath, and take heart – according to Mr. Trowbridge. Mergers are the leading events that drive organizational change, and can actually help purchasing organizations find a purpose and a focus they lacked, leading to brighter careers and significant supply chain management success.

It’s all about the strategic decisions you make, Mr. Trowbridge asserts. When a reorganization is imminent and your purchasing department is privy to it, there are a number of important steps to take. One of them is reviewing your contracts and ensuring “successor in interest” language is included. This could go a long way in avoiding a slew of renegotiated contracts. Negotiate tiered pricing in preparation for future volume increases, and consider the pros and cons of “termination for convenience” clauses.

During the reorganization, be mindful of a number of important strategies, including: leveraging opportunities from volume increases; consolidating usage through standardization; adopting best practices; and benchmarking with other supply management organizations. In addition, be mindful of any redundant contractual commitments and focus on retaining the best people through the reorganization.

Keeping your career on track through a merger

For most, maintaining a calm head and playing nice will serve you in more ways than you think. Here are a few key tips to follow:

• Be proactive in building internal and external relationships. Seek out new relationships with key stakeholders. Broaden your horizons by participating in purchasing associations. Seek out an executive “mentor.” Network with suppliers and recruiters.
• Embrace new ways of doing things. Stay positive and let go of attitudes like “we used to do it this way.” Be generous in rightly praising the work of your new sibling’s organization. Focus on being an innovator who can bring fresh, new ideas to the table.
• Understand and support the future “target environment.” This means coming to terms with the objectives of your company’s reorganization.
• Volunteer for long-term assignments, especially during the painful transition period. This will help identify you as a positive participant in the reorganization.
• Focus on savings and quality. Secure long-term supplier arrangements. Work on identifying cost reductions.
• Keep other irons in the fire. Have a Plan B and C for your career should things not work out. Explore external – and possible internal – career moves. Prepare for career opportunities. Keep your resume fresh and updated.
• Avoid “project” roles. Instead, seek key roles in the new organization that engage your services long-term.

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