M&A activity – does enterprise procurement have a seat at the table?

As I may have mentioned in an earlier article, I have been in the high-tech world since 1983, and shortly after that extended myself into the realms of purchasing. Since then, and in many capacities and levels of management, I have experienced the impact of an M&A.

During those times, I have learned that there are countless variables regarding possible answers to the question: does procurement, or for that matter, anyone regardless of profession, department, or position have a seat at the table? Because of these variables that change from one case to the next, determining who has which seat at the table before, during, and after an M&A, is equivalent to playing musical chairs in the boardroom. It all depends where you are standing when the music stops. 

The real focus should not be on does someone have a seat, but how someone will get a seat. 

A Case in Point

Through a series of acquisitions, a candy company in the U.S. mid-west grew dramatically in a very short period. A manufacturer of several leading brands, the company had before said acquisitions strategically built an extensive supplier network. However, and as a by-product of their M&A activity, what was once a strategically sound supply chain became an extemporal mix of highly suspicious, deeply segmented suppliers.

According to senior management, they did not fully understand or anticipate the reaction of the acquired companies’ former suppliers. Even though they did everything they could to convince them that becoming part of the larger pool would expose them to opportunities for increased sales, the suppliers remained skeptical. In other words, they weren’t buying the “increased opportunity” mantra further complicating the transition process.

It wasn’t until well after the fact that there was an acknowledgment on the part of management that while their focus was on areas such as financing, marketing, and production, they had overlooked the importance of collaboration between the different entities’ purchasing organizations. As a result, rather than foster an atmosphere of trust leading to a cohesive merger of people and intelligence, the result was a “territorial” struggle that manifested itself in a divided supply base. 

Now at this point, it would be fair to say that excluding procurement from the M&A planning and execution process, i.e., a seat at the table, was their undoing. But the bigger question is, what is the reason for the exclusion? 

More to the point, why did candy company executives fail to establish the channels of communication and collaboration between ALL diverse stakeholders both within and external to the organization? 

Ask Forgiveness Not Permission

The old axiom about it being “better to ask forgiveness than permission” is something that procurement professionals need to take to heart. In other words, stop waiting for an invitation or asking if you can come to the table – whatever the table is these days. Instead, proactively engage with senior management and look for opportunities to “contribute” by joining different committees within your organization.  

Granted, at the time of the candy company M&A activity, purchasing was still an adjunct of the finance department – order fillers. Today that has changed significantly. 

For example, a Gartner report estimates that over the next couple of years, the CMO will spend more on IT than the CIO. The reason given is that as we move beyond the cloud to computing “on the edge,” the CMO’s direct interaction with an organization’s customers provides them with a unique understanding of what technology is best able to serve the market.

As the redefinition of traditional roles within companies continues to change, there is a window – make that a door of opportunity for procurement to move into a position of influence.

Masters of Collaboration

Remember my earlier observation that an M&A can mean different things to different people at different times? How about what happened to the candy company? 

Considering the above, what do you believe is the one skill or skills that will harness the converging interests of multiple stakeholders into a cohesive strategy that produces the optimum outcome? That’s right, collaboration.

If you want a seat at the table, you have to demonstrate your knowledge of not only your area of the business but the other areas and how they operate both individually and collectively. Then, and only then will you know how you fit into the big picture of an organization in transition and drive the collaborative process that can result in a successful M&A. It is your ability as a facilitator to make an M&A happen versus being a spectator waiting and watching what happens that gets you that seat.

Written by Jon Hansen exclusively for Procurement Foundry