Product and Service Synergies in Mergers, Acquisitions and Divestitures

Leverage your Merger, Acquisition and Divestiture transformations by institutionalizing best practices in the people and processes

The most common focus of a merger or acquisition is the efficiencies gained by centralized overhead functions like accounting, and the accumulation of new product lines. Huge benefits, which are often ignored as secondary considerations, can be realized from product and service synergies through business process and supply chain harmonization. The net effect of delaying this harmonization is opportunity cost.

A corollary to this is that at the time of sale or divestiture of a business unit of a company, the value of the business unit increases when it has robust repeatable processes and obvious control over its supply chain.

TransR, through its business process transformation services, adds value and impacts both the top and bottom line at the most critical moments. To better understand how TransR can have the maximum impact on your push to more quickly achieve higher revenues, consider the diagram below of a generalized start-up acquisition case study. Informal or even no repeatable business processes are commonplace in a young, small company with only one or a few variations of products or services in their product line. This works because the volume and diversity of considerations are minimal. However, just as those very companies began to make a splash in the market and attract the attention of larger companies or private equity firms that want to acquire them, the throughput begins to decrease and production errors begin to increase because the informal processes begin to breakdown. Paradoxically, fear of more robust processes potentially restricting and hampering creativity becomes the very mechanism that retards productivity and consequently revenue generation. (See the orange line.)

True with an influx of cash from an acquiring company, additional human resources can be applied to the problems, product throughput and revenues will increase, but this results in an endless catch-up game and eventually even those resources will also be stretched thin. The original entrepreneurial culture becomes replaced by a chaotic, fire-fighting culture. Clinging on to the resistance to change in fact induced a change for the worse.

TransR provides you the alternative! Yes, it requires a cultural shift, but the shift will be governed by a vision of the future. (See the purple line in the above diagram.) By establishing robust end-to-end, closed-loop, repeatable processes, automation becomes obvious with a consequent reduction in non-value tasks being performed. More accurate design and higher productivity translate to more product production and service offerings, and an increase in revenue. Key resources are liberated to innovate. In the case of an acquiring company, return on investment is achieved more rapidly. Hopefully, in the acquiring company there are robust processes in place. If not, the job really starts there, supported by the same productivity arguments made for the start-up. It is really a maturation consideration for product and services development processes. Once those robust processes are in place, they become the electronically institutionalized business process backbone to which all acquisitions can be harmonized.

What are some of those processes that need to be created? There are several key processes:

  • The systems engineering V – requirements through validation and verification
  • Closed loop configuration and change management – cross-functional disciplines, PLM through ERP
  • New product introduction and product portfolio management
  • Supply chain management including new part introduction and inclusive, secure collaboration

A special discussion on supply chain management is merited primarily because it is often dismissed as merely a purchasing activity. Nothing can be further from the truth. Today, in most products, the majority of the constituent components are outsourced beyond the boundaries of the product builder. The obvious place to start when acquiring a company is to look for part replication in the commodity components and harmonize inventory management in order to achieve economics of scale. TransR can assist with that task.

An area of increased importance over the past decade relates to offloading the design and manufacture of parts to partners and key vendors in the supply chain who have a core competency in the nature of the part. Although this approach frees critical resources to address your own core competency, it also places dependencies on clarity of design intent and collaboration formats, intellectual property protection, regulatory compliance especially ITAR & EAR, and schedule. This is often true of a total service provider also and the components of their service offering. TransR can assist with your secure collaboration needs from both an infrastructure architecture perspective and a collaboration planning perspective.

In summary, huge benefits result from process and supply chain harmonization. Direct and indirect costs are the penalty for being a laggard in these endeavors. TransR can help you become a best in class leader in your field by transforming your business processes and personnel.