Merger Integration

Integrating merging entity's supply chain spend and sourcing activities to identify Day One synergistic savings and establish go-to-market approaches as NewCo.

PowerAdvocate works with customers to adopt a proactive approach to prepare for the integration of supply chain organizations and deliver cost savings. Involving the Supply Chain prior to Day One provides our customers an opportunity to deliver on savings goals and ensure a smooth transition to a single merged entity, much of the work cannot wait until the merger is closed. While each merger is unique, PowerAdvocate has established a set of critical supply chain integration activities that must be addressed prior to Day One.

Preparedness is key to completing a successful integration so below outlines the following Supply Chain focused Day One Activities:

 

Spend Normalization: 1-2 Months

Develop a unified view of pro forma spend. A complete and accurate view of your consolidated spend profile is critical to perform due diligence and set realistic synergy savings targets. PowerAdvocate technology, data and services enables your integration team to see all of the consolidated spend by aligning different taxonomies, diving into the details to create pro forma spend analysis, and ultimately identifying savings opportunities to deliver merger synergies. The following are key activities:

  • Gather spend from multiple source systems

  • Cleanse spend to enhance data (e.g. remove duplicates, supplier familying)

  • Normalize spend applying industry taxonomy to view and analyze pro forma spend

  • Merge spend to develop consolidated baseline spend profile

  • Collaborate with integration team to verify and refine (as needed) spend analysis results

 

Normalizing Your Spend Schema

Identifying Savings: 2-3 months

Identify and prioritize savings. Premerger activities to identify savings include setting up a clean room support to collect hundreds, if not thousands, of contracts and accessing current market data to validate and prioritize strategic sourcing efforts.

  • Facilitate clean room management through web-based technology (e.g., Contract Intelligence) allowing all parties to integrate contracts and collaborate towards identifying savings opportunities

  • Category specialists dive into details of spend:

    • Evaluate savings potential through a combination of shouldcost assessment, discussions with the integration team (to understand the historical sourcing activities), and high level benchmarking incorporating latest market intelligence

    • Prioritize categories in terms of opportunity, difficulty in achieving savings, and the size of spend

    • Review contracts to identify consolidated savings opportunity or restructuring potential

    • Leverage detailed cost breakdowns and forecasts on over 700 items to create specific equipment or services models to identify savings opportunities and prioritize approaches

  • Develop list of top categories to pursue in strategic sourcing activities

Delivering Savings: 4-6 months

Pursue synergy savings targets. Many utilities in the pre-merger stage go as far as possible towards executing on the identified savings. A best practice is to ensure close coordination of the integration team and organizations to accelerate execution and achieve target savings.

  • Identify category-level strategies to capture synergy opportunities

  • Develop category profiles/playbooks to guide immediate implementation:

    • Provide market and cost intelligence to evaluate supply chain risks (e.g., commodity exposure)

    • Incorporate price benchmarks as well as reflect current market conditions, in terms of medium to long term commodity price trends, capacity constraints that impact pricing, and any other relevant market factors, into savings results

  • Facilitate strategy execution across merging organizations through the PowerAdvocate sourcing platform and industry expertise

    • Create ready-to-go RFxs

    • Identify and create supporting supplier lists

    • Standardize go-to-market approaches

    Breakdown of Savings Opportunities

Merger Integration: Executing on O&M Savings Opportunities

Situation

With a change of leadership, one of the largest Fortune 500 energy companies in North America was facing a merger. With a diverse new operating fleet ahead of them, executives mandated that the company take this opportunity to make targeted O&M cost savings. In order to identify these cost savings opportunities, the two companies needed to merge all existing contracts into one central repository.

Approach

PowerAdvocate implemented Contract Intelligence to serve as a central repository for the two companies’ contracts and provided sourcing services to achieve O&M savings over the next 3 years for the combined entity.

Central Contract Repository:

  • Identified points of contact that would be uploading contracts per business unit
  • Determined naming conventions so that contracts could easily be found through the search function
  • Held training sessions on Contact Intelligence for groups who were using the tool on a daily basis

Identifying O&M Savings:

  • Collected spend data for each supplier and identified commonly purchased items from both companies
  • Created relevant savings models based on Market Basket Pricing
  • Developed a custom negotiation grid of key terms and targets
  • Supported bid events on PowerAdvocate’s Sourcing Intelligence platform

Result

PowerAdvocate facilitated the merger of 750 contracts and 400 consent forms from suppliers between both companies

PowerAdvocate’s additional sourcing services, market intelligence and technology products resulted in the client achieving over $30M in savings, exceeding the executives’ initial goal.

  • Implemented Contract Intelligence as a central repository for all supplier contracts and consent forms
  • Provided sourcing services to identify O&M cost savings opportunities
  • Uploaded over 750 contracts and 400 consent forms from suppliers between both companies

Delivered $30M in savings, exceeding the executives’ initial goal