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Mergers, acquisitions and the supply chain

Mergers, acquisitions and the supply chain

Will Lovatt, Vice President EMEA at LLamasoft, explains how the supply chain can thrive through complex mergers and acquisitions 

Are mergers and acquisitions exciting for anyone but the shareholders? For consumers and employees, mergers and acquisitions only breed uncertainty.

For competitors, it’s fear of the merging organisations monopolising the market. But it’s not all sunshine and roses for the organisations eyeing up the market share as they prepare to merge – for the likes of Sainsbury’s and ASDA who recently announced their plans to merge, the complexities of combining supply chains can present a significant challenge.

There are plenty of potential knock on effects that companies can experience in the supply chain as a result of M&A. Ahead of the merger, they should be considering a variety of factors. If not considered and addressed, these factors can negatively impact M&A initiatives and dash shareholder expectations.

Risks and rewards

Will Lovatt

Will Lovatt

The top contributor to the shortfall in M&A successes is arguably the failure to consider the synergies and redundancies of the end-to-end supply chain of both merging organisations. In high level M&As such as the one taking place between Sainsbury’s and ASDA, the potential implications and risks that generally set many M&A efforts up for failure include redundant facilities, assets, suppliers, customers, and products.

Addressing these factors is vital in high profile mergers and these will be significant considerations in the M&A between Sainsbury’s and ASDA. The risks can be mitigated by supply chain modelling technology which can be used to create a data-driven roadmap for success. This will significantly reduce the risk by enabling visualisation, analysis and optimisation of current and future supply chains.

With a clearer view of the supply chain, merging organisations can visualise a clear route to the healthy profits intended by the merger. They can also minimise opportunity for disruption. This global view will enable them to identify specific areas where cost saving measures can be applied and where efficiencies can be increased. When this view is applied through software that features supply chain modelling capabilities, organisations can also plan and model this for disruptive scenarios, ensuring the supply chain is ready to adapt should those scenarios unfold.

The road ahead

Supply chain design technology creates opportunities to leverage modelling across all types of M&A activity through the three major stages which are pre-merger, post-merger and divestiture or spin-off. With access to relevant data from points across both organisation’s supply chains, this is all easily achievable.

Access to this valuable data also increases the ability to collaborate easily with supply chain executives and other internal stakeholders invested in the supply chain.It helps in avoiding costly mistakes, such as over-estimation of potential synergies during the critical pre-merger phase and it provides alternative M&A targets for comparison, as well as analysis of new market strategies.

Post-acquisition, it helps find short-term improvements with limited disruption while analysing big-win but potentially more disruptive changes. It can create accurate projections of cost savings and operational efficiencies that can be reported to executives, the board, and the investors.

In a divestiture or spin-off situation, previously shared resources need to be separated, manufacturing and distribution capacity reduced and shared customers and suppliers may need to be allocated to one or the other entity. Supply chain modelling enables data driven decisions on which sites, products, customers and suppliers to keep and which to eliminate, as well as costing of supply chain operations.

M&As open up a whole new world of options when it comes to establishing an agile supply chain for the newly merged organisation. Supply chain modelling technology removes the risk and maximises the opportunity, removing the eliminating factors that could threaten the merger’s success and ensuring the best possible synergy within the new organisation. Adopting modelling technology will provide a data-driven roadmap that leads towards success in any merger or acquisition.

Global Banking & Finance Review


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