Mergers & Acquisitions – coming together or coming apart?
I was with a client yesterday conducting an energy review with a view to reducing their utility bills by up to 30% just by analysing who they buy from, are they in contract (and, if not, let’s get them in one), comparing the relative tax advantages/disadvantages of green and brown supply, etc.
The outcome was that over 5 locations they were dealing with 4 suppliers and only in contract with 2 of them.
How does this happen? Well, in the case of this client (and a number of others) part of the cause with M&A (Mergers & Acquisitions).
Whatever the state of the economy, growth for most successful companies requires merger and acquisition activity as part of its growth.
Most of you reading this will be, or will have been, involved in this growth activity at some point in your career.
It is interesting to note, however, that most of the integration activity that follows is around procedural and cultural issues; my experience is that when it comes to a number of areas of discretionary and non-discretionary spend, certain ‘stuff’ falls below the radar (not always, but you’d be surprised how often it does).
I’ve mentioned utilities already but what about office supplies, for instance? We have a client who was spending +/- £1.2 million per annum on these; with over 50 locations they were dealing with numerous suppliers and variances of as much as 200% were in evidence for some identical products.
Consolidating to a single supplier, instigating controls and visibility reduced this to an annual saving of £520,000 (43%). In these times of financial constraint, how many key personnel can you retain with this level of saving? And, by the way, reduction in use (a key component in reducing spend) generated measurable carbon reduction.
Sometimes the question is not one of who answers to whom but more a question of what are people accountable for. There are large inherent costs with any M&A activity though the point of the exercise is to make an organisation more successful; yet the very cost base that is being rationalised (by, for example, acquiring the supplier of your core components) is littered with areas of further efficiencies which, if you put on an environmental hat whilst engaging in integration strategies, would deliver a much more effective set of outputs.
To a degree, the higher the level of nomad you engage to see you through the process, the higher the level of advice you will get.
You’d be surprised at what benefits the new organisation will derive if you consider bringing in a green advisor post merger or acquisition; don’t forget, we follow the mantra of REDUCE, reuse recycle, so we’ll be looking at areas where you can use less through using more efficiently.
It’s worth it for us because we are focused on helping the business community to reduce its carbon footprint – but we mostly come from a commercial background (there are exceptions to every rule, of course; if I come through your door and I’m a fresh graduate, chances are my advice comes from a book not from experience), so we understand that your drivers will primarily (or exclusively) be financial and we will advise you accordingly.
Go on, give it a try. You have everything to gain and nothing to lose (unless you choose an adviser that charges for time of course… they shouldn’t!).
