How can Procurement add value to the M&A process?

As businesses return to operating at full speed in the wake of the Covid-19 pandemic, Merger & Acquisition activity is on the increase. How can procurement professionals with commercial acumen add a significant amount of value to this process – and at what point should they become involved in it?  

Ross Dawson, Operations, Procurement & Supply Chain Practice Lead, shares the insights from a fascinating discussion between a group of senior figures in the sector:

Attendees:

  • Alex Muir: Senior Advisor (Associate) at KPMG and ex-CPO for BP Downstream
  • David Medori: CPO at William Hill
  • Jonathan Wharfe: Recent CPO at Essentra
  • Paul Bestford: recent CPO at Burberry and Advisory Board Member to the International Institute for Advanced Purchasing & Supply
  • Paul Davis: Procurement Consultant at Kantar, and recent CPO for ASOS
  • Nick Partridge: Independent Consultant, ex Alix Partners
  • Stuart Stephens: Principal Consultant at 7 Step Solutions

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.

How do we change perceptions and demonstrate that procurement people are commercial individuals and not simply buyers?

Jonathan: We’re the opposite of sales people. They can be vague with their truth, whereas we by definition are very straight and direct.

When M&A activity’s going on, there’s a degree of subtlety and politics, which we as procurement professionals almost need to get some training on.

It’s in our DNA to be honest, but the world isn’t quite like that. Maybe it scares people and, as we aspire to move to the top table, we need to learn about the human side of deals, as opposed to just the logical side.

Paul D: We need to get to the point where we can be seen as advisors who can speak with a CEO or CFO about the vagaries of the wider business activities.

There’s a perception at that level that you can speak with procurement all day about how they save money. But if you ask them about the wider business and how it expects to drive revenue, they wouldn’t have a clue.

You can’t expect to be at the top table if you can’t articulate things in a way that’s relevant to people at that level.We’re so focused on saving money; but sometimes you talk to a sales and marketing person and say you can save them a million… Their reply is that they spend £115milllion a year, so thanks but no thanks!

However, if you can say you’re going to give them a service, or improve their bang for their buck, you then give them something they’re interested in – you’re having a different kind of conversation.

How can you present yourself as a person of value if you work as an independent consultant in procurement?

Nick: As an independent I’ve found a benefit in looking at cases more holistically because I’ve got the freedom to explore them.

When I can look at something in a very end-to-end way, take a cross-functional view on it, and then come up with a point of view myself – that’s worked very well as an independent.

There are pros and cons depending on the circumstances and the problem that needs to be solved.

The sort of situations where things have been interesting for me have been something like a footprint optimisation problem, which came to light through M&A activity, and the point of inflection provided an opportunity to look at things differently.

Now, that’s not just about procurement but it does involve some procurement input specifically to solve that problem.

However, if you’re taking a view on how to shape a function with lots of complexity and commodities and you need access to large amounts of data, having a firm behind you can be useful.

Ross Dawson: Having worked in procurement and M&A environments for 15 years now, I have seen a vast range of attitudes and activities connecting the two.  Ultimately, although commercial procurement is a key part of a deal, many organisations still do not fully appreciate the role procurement could play in the process, which can lead to less accurate financial targets and benefits realisation.  The procurement community on the whole, has a way to go to have the relevant input and gravitas required around the Board table, and yet there are a good number of highly commercial, business focused procurement leaders who would be invaluable on the journey.

Eton Bridge Partners has an excellent network of associates with both the procurement and transformational M&A elements that would help any organisations going through such change and I would relish the chance to make introductions as appropriate.

How can you present yourself as a person of value if you work as an independent consultant in procurement?

Nick: As an independent I’ve found a benefit in looking at cases more holistically because I’ve got the freedom to explore them.

When I can look at something in a very end-to-end way, take a cross-functional view on it, and then come up with a point of view myself – that’s worked very well as an independent.

There are pros and cons depending on the circumstances and the problem that needs to be solved.

The sort of situations where things have been interesting for me have been something like a footprint optimisation problem, which came to light through M&A activity, and the point of inflection provided an opportunity to look at things differently.

Now, that’s not just about procurement but it does involve some procurement input specifically to solve that problem.

However, if you’re taking a view on how to shape a function with lots of complexity and commodities and you need access to large amounts of data, having a firm behind you can be useful.

Ross Dawson: Having worked in procurement and M&A environments for 15 years now, I have seen a vast range of attitudes and activities connecting the two.  Ultimately, although commercial procurement is a key part of a deal, many organisations still do not fully appreciate the role procurement could play in the process, which can lead to less accurate financial targets and benefits realisation.  The procurement community on the whole, has a way to go to have the relevant input and gravitas required around the Board table, and yet there are a good number of highly commercial, business focused procurement leaders who would be invaluable on the journey.

Eton Bridge Partners has an excellent network of associates with both the procurement and transformational M&A elements that would help any organisations going through such change and I would relish the chance to make introductions as appropriate.

Ross Dawson

Partner
Interim Management
Business Transformation & Procurement, Supply Chain & Operations


Ross has over 10 years interim recruitment experience and specialises in executive level interim appointments within business transformation. Ross is accustomed to working with a diverse client base from global businesses to SMEs across private and public sectors, as well as not-for-profit.