Supply chain due diligence is vital when considering a merger or acquisition, according to newly published research. Tompkins International’s paper, Laying the Foundation for Successful M&A: A Supply Chain View, warns that when conducting due diligence associated with mergers and acquisitions, companies frequently fail to investigate adequately supply chain factors.
“Far too often, M&A fails due to lack of synergy, related party conflicts, clashing cultures, or information technology issues,” said Jim Tompkins, CEO of Tompkins International and author of the paper.
“I want to help business leaders avoid these types of mistakes altogether and provide a better understanding of how supply chains create value through M&A. A strong foundation cannot be built with just one piece of the M&A puzzle; you need to look at the full supply chain picture.”
He argues that, through supply chain due diligence, an organisation can explore the performance of the target company’s supply chains to obtain valuable insights into M&A decisions. Specifically companies should define supply chain baseline and gain an understanding of the supply chain document performance.
Companies engaged in M&A activity should also establish present performance levels for targeted areas and compare them to relevant benchmarks to see where opportunities, challenges, constraints and risks exist, if the acquisition were to be made. It is also necessary, according to Tompkins, to perform a gap analysis and gap analysis assessment to reveal opportunities to grow revenue, as well as the risks associated with the M&A candidate’s supply chain.
Finally companies should work to connect the opportunities and challenges with prioritised supply chain initiatives so that they can be addressed given that the merger or acquisition occurs.
Tompkins added that tight timelines typical in the M&A process may mean that supply chains are not being fully considered in the overall impact of the deal. “This is not just about financial engineering,” he said.
“Anyone considering M&A needs to be aware of the opportunities to create value through supply chain improvement and integration.”
Source: Procurement Leaders