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With Acquisitions, Procurement Planning Pays


A.T. Kearney
Sourcing & Procurement Procurement Planning Procurement Strategy

With the proper procurement planning, companies can produce 40
percent more value in their acquisition activity in the first year. It’s not a fairy tale, though the story is reminiscent of the Wizard of Oz.

Once upon a time... There was a time when corporations could rest assured that if they had done their due diligence and selected acquisition targets with good potential for return, they would eventually reach the “Emerald City” of realized synergy targets. Unfortunately, in recent years many have struggled to extract that hoped-for value. A.T. Kearney’s analysis of 50 deals that closed between 2006 and 2008 revealed that over half failed to improve Total Shareholder Return (TSR) relative to the market within two years following close of the deal. These findings are in line with broader industry research, now spanning several decades, indicating that the majority of mergers fail to achieve synergy targets. Fortunately, some mergers are successful. And there are some common elements among those that do succeed—prominent among them is the early engagement of procurement. Corporations that engage the procurement organization strategically and early in the merger process will deliver powerful cost savings in Year One. Over and above that obvious benefit, these Year One cost savings play an important role in signaling success to the markets.

By Kish Khemani and Brent Ross
Supply Chain Management Review, March/April 2013


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