M&A activity in the US has faced instability, with deal values dropping by 37% from 2021 to 2022. Amid economic uncertainties, optimizing procurement processes can drive substantial value in mergers.
While headcount reductions and operating-model changes are common, procurement-driven savings can contribute up to 40% of a merger's total cost savings potential, according to McKinsey & Company.
– Include Procurement Experts: Engage specialists to enhance synergy realization.– Establish Spend Taxonomy: Align categories for accurate comparison and consolidation.– Launch Value-Capture Early: Identify savings opportunities before finalizing the deal.
– Price Harmonization: Align prices for savings on similar products/services. – Leverage Combined Spend: Use aggregated spend for better supplier discounts.– Policy Alignment: Standardize policies and SLAs for maximum value.– Demand & Compliance Management: Enforce spend limits to minimize waste and budget ownership.
- IT/Telecom: IT services, telecom equipment, and hosting services.- Claims & LAE: Claims adjusting, fraud investigation, medical bill review.- General & Professional Services: Consulting, marketing, temporary labor.- IT/Telecom: IT services, telecom equipment, hosting services, and energy.
Companies can initiate policy changes and supplier negotiations before the merger is finalized. Implementing a clean team with expertise ensures effective execution while maintaining confidentiality.
Effective procurement strategies can significantly enhance cost synergies during M&A. By applying these methods, companies can start realizing bottom-line benefits from Day 1 of the newly merged entity.