It
happens to me almost every week. I get a call from a firm (private equity or a
company that makes and ships products) explaining that they did a deal a year
ago … and now it is not working out. Could we help?
Typically,
these are “add-on” deals and someone has now realized that the supply chain is
an important part of the deal. Their integrated supply chain is not working,
and they want to know why this is so and how it can be fixed.
Of course,
I am happy to help, but DARN, it would have been so much better for all
involved to avoid this “one year later” call and get it done right the first
time!!
It is my very strong
belief that the supply chain is so important that it should be a key
consideration, beginning with the due diligence and all the way through
acquisition and integration of the supply chains. Unfortunately, what happens more
often than not is that the M&A process is so time compressed and the
initial aspects of integration are so hectic that the whole topic of supply
chain is not even addressed.
Then the
light blub finally goes on – a year after the deal was completed someone says,
“This supply chain is broken, we need help.”
What normally
occurs during this hectic year is that many decisions are made that may or may
not be on the right supply chain path. Questions such as these are likely to
arise:
- Do
we use Company A or Company B’s order entry system?
- Do
we use Company A or Company B’s S&OP process?
- Do
we use Company A or Company B’s distribution operations?
- Do
we use Company A or Company B’s sales team?
- Do
we use Company A or Company B’s IT?
They are
missing the point. The interesting thing here is that when Company A buys Company
B, then the correct answer is often to not use what Company A has done or what
Company B has done. The combined Company AB is a different
organization from Company A or Company B, and it is quite possible that the new
supply chain has different requirements from what either Company A or Company B
had previously.
So, three
big points to come away with here:
- It is very important for the
supply chain to be considered during due diligence and in formulating the
strategy for the acquisition.
- It is very important that an
objective view of the supply chains of the two separate firms be understood, but
even more important that the requirements of the combined supply chain be fully
understood and addressed.
- It is very important that
decisions about supply chain integration be reached quickly and communicated
widely soon after the acquisition is announced in order to accelerate the
integrated supply chain.
For more
reading on this topic, check out Tompkins’ position paper on Integrating
Supply Chains From Business Combinations.
Go!Go!Go!
More Resources
Merger and Acquisition Strategy
You Shouldn’t Spell ‘Due Diligence’ Without ‘Supply Chain’
Mergers and Acquisitions in the Service Supply Chain Industry