At what point should procurement become involved in an M&A process?
Jonathan: Logically, procurement is a huge opportunity to drive savings. But if we’re really honest, it’s not getting the place at the table that it should. Procurement, as a profession, needs to look in the mirror and ask why that is.
My view is that it’s down to culture and personalities. There’s still a legacy of seeing procurement as argumentative negotiators.
As a profession we (procurement) need to take a more consultative approach to have the right to sit at the table. To do that, you have to look at the ‘grey sides’ of the world, whereas typically procurement people are too black and white in their approach to things and, therefore, don’t bring that view to the table.
David: It very much depends on the team and the individuals in it. At William Hill, we’re going through two acquisitions this year after being bought by Caesars Entertainment Group.
I’m on the steering group for our business and I’ve got a big job to carve out the 100-odd contracts that we’ve spent three years joining together as a group. That’s being tracked – every week I have to report on this activity.
We’ve got a key part to play, procurement is a piece of the jigsaw and we definitely have a place at the top table.
Stuart: It comes down to a business’s understanding of what procurement does. In so many cases, people think it’s a back-office function that just processes stuff and you go to them when you need to buy something.
It works better when procurement looks at the bigger picture and says: “OK, what are your objectives? What are you trying to deliver? And how do we support that?”
As soon as you start to add value to their life, you get invited to go through doors that may have been closed previously.
Paul D: I don’t think businesses naturally look to procurement to be part of that top table as a result of M&A activity generally. I agree that this is particularly the case if the business doesn’t understand what procurement does.
It’s incumbent on all of us to correct that. If we can’t get our value proposition out there clearly enough, we won’t be present at the top table when an M&A piece comes along.
Paul B: I’ve found that procurement rarely has a seat at the table when the business case is being formed. I’ve seen many cases when the business case rests quite heavily on procurement benefits, and I’ve not been convinced that the benefits have been particularly well thought through.
You would think that as soon as a company considers making an acquisition for the purposes of synergistic benefits coming from procurement, the first people you would want in the room to discuss whether or not the numbers are viable would be your procurement team?
Nick: In the past, procurement has been almost like a hatchet function once things are defined. That’s when people say: “Now go and get me the best price in the market.”
From what I’ve seen, the companies that have taken a step beyond that, and where procurement is really integrating and adding value, are where the skill set has gone outside of that to look at a real end-to-end value chain perspective.
Alex: I’ve been involved in a host of M&A deals. Successful, unsuccessful, some with procurement involved up front, and others where procurement has been gifted a number on a spreadsheet.
Ultimately, the earlier procurement is involved in the process, the more value they can add.
When the business development team gets them embedded early on in the process, and gets them to be part of that synergy case, it’s actually critical for the quality of assumptions, and the reasonableness – for want of a better word – of the deal that’s done.
I have seen that make the difference, because the commercial case was improved by procurement being involved.
I’ve also been gifted the situation of “We’ve got all these synergies, everyone else hasn’t turned up to the party, your number’s tripled – good luck, now be the hero and save the day”.
The mindset you need in a deal situation is the ‘art of the possible’. Hypothesis-led thinking, more consultative approaches, and a boldness in that commerciality – which we, as procurement people, intrinsically have.