Mergers and acquisitions happen, more often than not, to increase the earnings of the new entity. One way to increase earnings is to increase sales. But when Company A acquires Company B, the total sales of the new entity will start off equaling Company A’s existing sales plus Company B’s existing sales. Same as it was before. So increased sales aren’t likely the way that the principles expect to increase earnings, not in the near term.
Another way to increase earnings is to decrease costs. If your company’s been acquired (or your company acquired another, similar company—or is about to) and you start hearing buzzwords like synergy, efficiencies, and redundancies—know that costs are going to be decreased.
The lowest hanging fruit (another buzzword to watch out for, especially if your cubicle is on a relatively low branch) is human capital. That’s you, my friend. And me. And all the other humans working at companies. So the first thing you need to do if your company’s been acquired is to check your job description. Is what you do something that someone at the other company likely does? That’s where those human capital synergies are going to come from. Two employees doing credit checks? The new company only needs one. You get the point.
The second thing you need to do if your company is acquired is… to put together a list of your suppliers. This list should be in either Excel or some easy-to-use Access database.
“Easy-to-use” is very important. People who are trying to justify their existence tend to make what they do look very complicated—thinking “see, what I do is so technically specific that no one can figure it out but me; ergo I am I essential.” However, I can tell you from the experience of someone who has been in the conference room—when names were put on lay-off lists—that often the thinking of management is, “I don’t understand why that person’s job is a full-time headcount position. It feels like a lot of fluff. Let’s just get rid of him (or her) and see what happens.”
Okay, back to that second thing. Your list of suppliers. Your supplier list should include the following information for each supplier: location, contact, contact info, products/services supplied, are products/services proprietary/unique (yes/no), annual spend, supply agreement (yes/no), agreement termination date, early termination clause (yes/no), termination without cause (yes/no), termination notice. All this information should be searchable, filterable, and sortable. Now, rank the list by spend. And then re-rank the list by importance (you might have a low spend supplier that is more important than a high spend supplier—i.e. a chip supplier that makes a critical piece of hardware that’s proprietary but not expensive).
This list is going to be one of the most important post-merger documents your new company is going to need. The company that acquired you will likely be packing a similar list. You’ll be comparing lists and figuring out what actions to take (i.e. where to consolidate your supply base). And that’s because—second to human capital consolidation (another term to keep your ears open for)—supply chain consolidation offers the greatest opportunity for cost reductions, and earnings growth, in a post-merger environment.
With your robust but easy-to-use supplier lists, you can recommend quick hits (or call it low-hanging fruit, if you want to get management’s attention)—like indirect suppliers of office supplies, travel services, janitorial services, landscaping, phone, and Internet services and so on. Then you can double-click on direct suppliers (if you use both the terms double-click and low hanging fruit, you’re going to get listened to)—contract manufacturers, raw material suppliers, etc.
All suppliers are in play in a post-merger world—third-party logistics providers, freight forwarders, parcel shipments (put UPS and FedEx in a room and let them duke it out), etc.
Hurry up and do this second thing that you need to do if your company is acquired. And, if you do it right, you might not have to worry about that first thing.