M&A: Is What’s Good for the Shepherd, Good for the Flock? Part II

In Part I, we noted that the prophet has a different take than the doctor on the recent M&A (merger and acquisition) frenzy that is again gripping the Procurement space and, contrary to the doctor‘s opinion, the prophet believes that, at least in the long term, it brings more clarity than confusion. We then summarized the cons that the doctor sees with the M&A frenzy and the pros that the prophet sees. The points that the prophet made were all valid points and they definitely presented opportunities for the firms in question, but is what’s good for the shepherd good for the flock?

While it’s obvious that any of the advantages brought up by the prophet bring great value to the new organization, do they bring great value to the customer as well? (Let’s face it, while the doctor loves innovative and customer-focussed vendors, he loves innovative and customer-focussed solutions even more.) The Supply Management space will only advance if the organizations doing Supply Management can advance. And to advance, they need the right (transitional) processes, the right technology platforms, and the right talented people to run the function. Does a merger necessarily improve the processes, the platforms, or the people? Let’s take the advantages proffered up by the prophet one by one.

  • Differentiation by way of a broader solution offering
    If you were relying on the vendor for its great sourcing platform, and the merger was between a platform provider and a services provider that allows the new organization to offer a full (outsourced) sourcing solution, how much does this help you if your organization was a leader in sourcing process and capability and doesn’t need any of the new service offerings? Or let’s say a sourcing provider and P2P provider merged but your organization already has a superior P2P platform implemented and integrated with the sourcing platform. Does the merger help you?
  • New Points of Entry
    While it’s great for the newly merged company that they have more opportunities to secure more customers, except for the fact that this may lead to increased financial stability for the provider (which will make your risk management department happy), that doesn’t do anything for you as a customer. The only thing that you care about is whether there are new products, functions, or services that make your operations better.
  • Lower-Cost foot in the door
    With the exception that this lowers the provider’s overhead in the long term and the provider is willing to reinvest this savings in innovation that results in free platform / product upgrades, this doesn’t do anything for you as a customer.
  • Stealth-Transformation
    While this is great from the perspective of an acquiring company that can use the acquiree’s personnel and capabilities to transform itself into a big league competitor under the radar, what does this do for the end customer? Maybe nothing!
  • A Better Executive Team
    If the executive team understands your needs and support requirements better and actively works to improve their service offerings for you, this could be a good thing, but not every new thang will be right for your organization.
  • New Products / Solutions
    If the new products / solutions complement the products / solutions that your organization is using and can be utilized by your organization to increase organization capability and maturity, this will be a good thing, but the new products / solutions might be focussed on a completely different type of customer base and leave you hanging high and dry.

In other words, while all of these benefits are arguably good for the shepherd, there is no guarantee that any of them are good for the existing flock. And even if some of these benefits are good for some of the herd, there’s no guarantee that they will be good for each individual sheep. So, again, the doctor must ask, from a customer perspective, M&A: Confusion or Clarity?

M&A: Is What’s Good for the Shepherd, Good for the Flock? Part I

As the doctor expected, the prophet has a different take on the recent M&A (merger and acquisition) frenzy that is again gripping the Procurement space and, contrary to the doctor‘s opinion, the prophet believes that, at least in the long term, it brings more clarity than confusion. Furthermore, in his posts over on Spend Matters, the prophet makes some great arguments as to why M&A is a good thing, at least from the vendor perspective.

But is what’s good for the shepherd good for the flock?

Let’s look at the cons that the doctor highlighted in his original post that asked if M&A was confusion or clarity.

  • Many acquisitions end up being overvalued
    As the prophet neatly summarized, the doctor has noted that some transactions often remain “in the red” even a couple of years after the transaction has been made. Maybe the value was there, but if it’s not captured, and the private investors and/or VCs start demanding realization, who’s going to pay?
  • Many acquisitions end up significantly overlapping in functionality / offering
    Does a customer need two RFX platforms? Two invoice management platforms? Two reporting engines? Nope! In order to streamline costs and operations, one of these platforms has to be axed, and a large portion of the customer base migrated. If the functions don’t map one to one, who loses?
  • Many acquisitions run on completely different platforms & stacks
    This makes integration a nightmare. Either a lot of work, and money, will need to be invested to make an integrated platform work or one platform will have to be selected as the core go-forward platform, critical functionality developed on it, and a migration strategy, and module, developed for the customer base that will need to be migrated. In the short term, costs will go up (and not down, which is what should happen if there is synergy).

Now let’s look at the pros that the prophet highlighted in his pieces on “A Critical Take on M&A in Procurement Technology” and “M&As in Procurement Technology Work” on Spend Matters.

  • Differentiation by way of a broader solution offering
    than the companies could offer on their own, which creates
  • New Points of Entry
    into the market than a point-based solution can provide with a
  • Lower-Cost foot in the door
    since, even if the technology headcount can not be synergized, at least the salesforce can be (and sell more per unit). In addition, the combined company can effect a
  • Stealth-Transformation
    that allows the combined organization to offer more than each could on its own, because 1+1=3, and all of a sudden the new organization can graduate from the minors to the big leagues, with the support of
  • A Better Executive Team
    that is formed by bubbling up the cream of the crop for each position in a manner that allows each executive (who often had to wear multiple hats in the individual smaller organizations) to focus in on their key strengths which will help the company identify
  • New Products / Solutions
    that could be developed and brought to market by the combined organization that neither organization could consider on its own.

And these are all real opportunities that can be realized by the firms in question in a merger or acquisition that truly has the right synergy, but is what’s good for the shepherd good for the flock? Stay tuned for Part II!

Happy Canada Day! Now Learn the Pledge of Allegience.


I pledge allegiance to the Flag of the United States of America, and to the Republic for which it stands, one Nation under God, indivisible, with liberty and justice for all.

One more time.


I pledge allegiance to the Flag of the United States of America, and to the Republic for which it stands, one Nation under God, indivisible, with liberty and justice for all.

Got it? If you, my fellow Canadians, decide to give the Conservatives, and Mr. Harper in particular, one more turn in office (which is what it looks like you want to do based on recent polls, as summarized in last month’s National Post that puts Liberals at 32%, Conservatives at 31%, and the NDP at 28%, with the Liberals having the same slight lead they had before they lost the last election). Now, the doctor likes our Southern neighbours, but also likes that Canada has its own identity, which is one that it appears Harper is very likely to sell for what he believes is greater economic stability. So, fellow Canadians, before you elect Harper again, you better learn the pledge of allegiance. You could need it as early as next Canada day. So, before you move on to your Canada day festivities, say it with me one more time. (Third time’s the charm.)


I pledge allegiance to the Flag of the United States of America, and to the Republic for which it stands, one Nation under God, indivisible, with liberty and justice for all.

And now, just like Northern LOLCat, you know it too!

Geopolitical Damnation 26: The WTO

The WTO, or World Trade Organization, is an intergovernmental organization that regulates international trade, and one you need to be intimately familiar with if international trade is core to your business. Officially commencing operations twenty point five years ago on January 1, 1995 as a result of the Marrakech Agreement, signed by 123 nations, it replaced the General Agreement on Tariffs and Trade (GATT) that had governed international trade since 1948.

It serves to provide a framework for negotiating trade agreements and for establishing a dispute resolution process for alleged breaches of WTO agreements. Now, it is true that most of the agreements negotiated, as well as most of the mediations that take place, are between nations and, more specifically, their governing bodies, but the agreements that are negotiated, and mediated, limit what your private sector organization can import and export.

Being aware of what is going on is critical if you are involved in trading a commodity that is governed by an agreement being mediated or enforced by the WTO; if your government body is trying to enforce buy local or foreign exchange restrictions (as measures requiring the use by an enterprise of domestics products or measures restricting access to foreign imports to export amounts are explicitly prohibited as all members of the WTO agreed to the Agreement on Trade-Related Investment Measures [TRIMs]); or if your organization is trying to protect, and enforce, its intellectual property rights internationally as the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights [TRIPS] governs IP with respect to trade, for example.

Similarly, it’s important to be up to date on what’s not going on. For example, the current round of negations between member countries, which was dubbed the Doha Development Round, which was supposed to make globalization more inclusive and help the world’s poor by slashing barriers and subsidies in farming, has been ongoing since November 2001, with no end in site. As a result, many countries are resorting to establishing their own bilateral trade agreements, which they may or may not be all too public about until the agreements are signed. Case in point — The Trans Pacific Partnership (which is so egregious it is a Damnation in itself).

But if you keep up with what’s going on, you know whether the material, product, or service you’re interested in is covered under a WTO (mediated and regulated) agreement, whether it’s a bilateral agreement between your country and the country being exported from or imported into, or whether an agreement is being negotiated that will cover the material, product, or service and, more importantly, whether your lobby group, or your local manufacturers’ association lobby group, should be sticking their nose where the government may not want it to make sure that the negotiators understand all of the issues and what is good for private industry.

It’s important to remember that these agreements not only define the framework of international trade, but the bilateral agreements being negotiated now by those countries too impatient to wait for the close of the Doha round (which could take another decade) define the tariffs that private industry has to pay. And if tariffs come into effect that are too high on your primary product lines, your organizational existence could be in jeopardy. Unless Supply Management can find another source (or sink) in another country, the organization could be forced to change product or service lines or even go out of business.

For the most part, having framework and agreements is a good damnation, but it’s still a damnation nonetheless.

Your Supply Chain is in Flux. Last Chance to Find Out How Big those Oscillations Are!

A few weeks ago we asked if your SRM was in a State of Flux because good SRM is critical to smooth supply chain operations. Later or sooner your supply chain is going to be disrupted, and without good supplier relations, you will not have any notice, or any help dealing with the disaster that is headed your way. (The chances of your organization NOT not having a major supply disruption in the next 12 months are less than 15%. Think about that.)

Then, a couple of weeks ago we remind you that your SRM, despite what you may think, is in a state of flux and that you should find out where. Especially now that you have the chance to do it for free. State of Flux, a provider of Supplier Relationship Management software and services, and the initiators of the ground-breaking SRM Research Report, are undertaking the seventh annual study which aims to understand not only the state of the practice in SRM, but what is needed for companies to get the executive sponsorship and support they need to not only master SRM but excel.

Last year’s 2014 publication was one of the most ambitious Supplier Relationship Management reports ever published — clocking in at 216 pages of data, results, and expert interpretation and full of valuable, actionable, insights that any organization can use to advance their SRM practices. This year’s study, which will likely have over 500 global participants, should be equally insightful and all those organizations that participate get full access to the results and underlying research ahead of the market. You can measure up against your peers, and improve, well before the average, laggard, organization (which will only have restricted data access if not a State of Flux customer), has a chance to register, download, and review the final report.

Considering that this study will only take about 45 minutes of your time, the reward is infinitely more valuable than the cost! But you’re running out of time. The deadline for participation in this year’s study is July 10th. (Next Friday.) Don’t miss out on this great opportunity — take the 2015 SRM Survey today!