by Kalle Kilpi
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Article revisited on July 10th, 2017
How are the majority of M&A synergies materialized? Through renegotiated contracts with suppliers, employees and customers.
M&A transactions trigger the need to transfer thousands of contracts with suppliers, employees, customers and real estate owners. At the same time, the acquirer typically wants to negotiate new terms, such as volume discounts. Just the procurement synergies, through renegotiated supplier contracts, can account for 30 to 50 percent of merger-related increases in shareholder value.
Renegotiating contracts takes a lot of work – and the main bottleneck slowing down the process is the limited number of people capable of performing these important, time-sensitive negotiations. The right M&A software can help you to define a best practice process that is easy for anyone to execute. Plus, it makes it possible to run hundreds of negotiations in parallel. And of course, being able to simultaneously handle twice as many negotiations can cut the synergy realization time in half.
Direct bottom-line impact
For example, in a deal with $12 million in annual procurement synergies, if the synergies are realized in 6 months instead of 12 months, then the acceleration has a one-time value of $3 million.
Moreover, being able to provide the same quality process to every supplier, customer and employee means higher satisfaction and better quality from the whole integration program.
Steps for cutting M&A synergy realization time in half:
- Get your best experts to clearly define the process to negotiate individual contracts and M&A best practices that are easy for anyone to follow.
- Import your list of contracts (from Excel/SAP/Etc.) into Midaxo.
- Delegate work to juniors who can execute the negotiations by following the best practice process.
- Track progress using visual M&A Analytics dashboards and drill down into individual negotiations as needed.
Using the Midaxo M&A Platform to accelerate synergies
Midaxo is typically used to run the pipeline of overall acquisitions and integration projects (more about that here). The same platform can also be used to run the pipelines of individual contracts to be renegotiated, employees to be onboarded and other key value creation activities.
This expands usage from managing the overall acquisition and post-merger integration steps to managing individual contracts and employee onboarding.
Contract pipeline view
Midaxo's M&A pipeline view provides a kanban board-like view of contracts to be renegotiated or employees to be onboarded. Stages are shown as columns and individual contracts as cards – and individual team members can see a personal view of just the items relevant to them.
Each individual contract has its own page containing key information, the agreement documents and a communication log with the counterparty.
Executives can view progress in real-time, see how synergies are materializing and identify any bottlenecks in the M&A process.
Using a deal management software platform for only the overall acquisition and integration project is just scratching the surface of what’s possible. Expanding use to systematize key value creation processes such as contract renegotiations, HR processes or customer onboardings can greatly accelerate synergy realization and provide big and fast returns.
Watch our webinar "Cut synergy realization time in half with contract transfers."
If you want to talk more, please feel free to send me a message or contact one of our specialists here.