M&As Offer Big Opportunity for Supply Chain Leaders
May 07, 2012
Over the next few years, companies and their financial backers will look to mergers and acquisitions (M&A) as a means of increasing shareholder value. The latest survey by AlixPartners and the Economist Intelligence Unit found that many executives see acquisitions as a key growth tool in the next year. When asked how they might use their cash for their domestic operations, 29 percent said they intend to use it to make acquisitions, with 26 percent saying the same regarding their overseas operations. Most forecasts indicate that 2012 M&A activity will be comparable to recent years, showing no signs of slowing down despite cautious global economic forecasts.
Often, the supply chain is expected to offer one of the greatest, if not the greatest, financial opportunities for generating benefits in a merger. Indeed, supply chain executives are pressured to start showing results almost as soon as a merger is announced. They’re expected to be able to describe the suppliers they should leverage, the distribution centers and/or manufacturing facilities they can rationalize, and the transportation routes they’ll be able to optimize in double-quick time. Of course, they will also be expected to develop an aggressive, yet achievable, synergy target as quickly as possible.
Yet too few supply chain-intensive mergers fulfill their anticipated or desired business expectations. The days of producing simple economies of scale — adding Supply Chain Number One to Supply Chain Number Two — seem a thing of the past.
It will not get any easier to wring value from the union of two supply chains. No corporate function has grown in complexity in recent decades as much as the supply chain has. Take a look at your own organization. Does the supply chain fulfill international demand? Is it handling inbound goods from international sources? Does it process duty obligations on imports? Is it using more than one modality to distribute or receive goods? Does it involve decision-support technology to manage purchased transportation? What about a multi-national network of warehouses to deploy goods in the marketplace? How reliant is your organization on third-party logistics providers? Do you struggle to integrate your technology systems with those of your supply chain partners?
Chances are you answered “yes” to several of the questions above — and many more like them — especially if your company operates a global supply chain. But, when comparing supply chains even within the same industry or geography, it’s not likely that there are common providers, technologies, or approaches — thus complicating a smooth and straightforward integration within the sector, let alone in any cross-sector merger.
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Over the next few years, companies and their financial backers will look to mergers and acquisitions (M&A) as a means of increasing shareholder value. The latest survey by AlixPartners and the Economist Intelligence Unit found that many executives see acquisitions as a key growth tool in the next year. When asked how they might use their cash for their domestic operations, 29 percent said they intend to use it to make acquisitions, with 26 percent saying the same regarding their overseas operations. Most forecasts indicate that 2012 M&A activity will be comparable to recent years, showing no signs of slowing down despite cautious global economic forecasts.
Often, the supply chain is expected to offer one of the greatest, if not the greatest, financial opportunities for generating benefits in a merger. Indeed, supply chain executives are pressured to start showing results almost as soon as a merger is announced. They’re expected to be able to describe the suppliers they should leverage, the distribution centers and/or manufacturing facilities they can rationalize, and the transportation routes they’ll be able to optimize in double-quick time. Of course, they will also be expected to develop an aggressive, yet achievable, synergy target as quickly as possible.
Yet too few supply chain-intensive mergers fulfill their anticipated or desired business expectations. The days of producing simple economies of scale — adding Supply Chain Number One to Supply Chain Number Two — seem a thing of the past.
It will not get any easier to wring value from the union of two supply chains. No corporate function has grown in complexity in recent decades as much as the supply chain has. Take a look at your own organization. Does the supply chain fulfill international demand? Is it handling inbound goods from international sources? Does it process duty obligations on imports? Is it using more than one modality to distribute or receive goods? Does it involve decision-support technology to manage purchased transportation? What about a multi-national network of warehouses to deploy goods in the marketplace? How reliant is your organization on third-party logistics providers? Do you struggle to integrate your technology systems with those of your supply chain partners?
Chances are you answered “yes” to several of the questions above — and many more like them — especially if your company operates a global supply chain. But, when comparing supply chains even within the same industry or geography, it’s not likely that there are common providers, technologies, or approaches — thus complicating a smooth and straightforward integration within the sector, let alone in any cross-sector merger.
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