He is a supply chain consultant specialising in supply chain dynamics and is founder and Executive Director of Pharma TEAM-UP, a non-profit initiative with the goal of fostering closer supply chain integration. He is one of the principal architects behind the Poseidon program, which has been conceived to radically transform the transportation of pharmaceutical products by sea.
Strategy Supply chain integration and optimization: Special Series, Part 3: Getting ready for acquisitions and divestments This article is the third in a three-part series about the important role supply chain executives play in corporate mergers, acquisitions, and divestments.
Part 1 examined how supply chain executives can create value and prepare assets for sale in order to maximize the value for the seller. Part 2 considered the sign-to-close phase, including how to develop a transition plan. Finally, Part 3 discusses executing on those plans, including stabilizing the assets and integrating them.
Integrating and optimizing a new asset into existing operations to realize synergies —while continuing to support the overall commercial objectives of the deal, of course—must be their priority following an acquisition. This drives value and helps confirm that the transaction delivers the benefits envisaged as part of the original deal thesis.
The importance of this follow-through cannot be overstated. Fail to successfully integrate and optimize, and all the hard work undertaken during the pre-close and sign-to-close stages will have been for nothing.
In fact, poor integration is routinely cited as the main reason for the failures of mergers and acquisitions. Article Figures [Figure 1] Typical integration program structure Enlarge this image [Figure 2] Sample transition services governance structure Enlarge this image This issue is becoming relevant to a growing number of supply chain professionals.
In the first of this three-part series, we looked at the pre-close period and how getting a seat at the table as early as possible in the sale process allows you to not only create more value but also simplify the transaction and reduce the risk of separation. Arriving at a later stage in proceedings leaves little opportunity to influence the outcome.
Part 2 focused on the sign-to-close phase and highlighted the specific areas executives, for both the buyer and the seller, should focus on when planning the separation of a business unit in order to drive a timely and efficient transaction.
Developing a detailed and effective supply chain management transition plan is the key to lowering risk while providing a smoother, more cost-efficient process.
Getting this into place early makes the deal more secure and minimizes the chances of issues arising and destabilizing or threatening it during the transition process. Stabilize—The transferred asset needs to be stabilized to provide business continuity and prevent a negative impact on its market in other words, de-risking it.
Integrate—It must then be integrated into existing operations to begin to realize the synergy benefits that were part of the original deal thesis.
Optimize—the buyer realizes the full synergy potential from the acquisition through a portfolio of supply chain performance improvements, which support both commercial and operational objectives. We also consider how supply chain professionals can accelerate the desired outcome.
It includes establishing a governance structure that facilitates integration of the acquired asset, stabilizing the asset after the close by creating a "hypercare" organization to resolve problems, and by monitoring performance and regulatory compliance.
The goal of the integration program structure is to drive value-capture opportunities, help build a sustainable future state operating model FSOMand provide business continuity post-close. While the executive steering committee provides overall direction and vision for the transaction, the integration management office, in coordination with the functional teams, is responsible for its day-to-day management.
This includes managing execution risks and cross-functional dependencies, as well as providing business continuity and stakeholder management customers, suppliers, and so forthamong other things.
Additionally, to expedite value capture and synergies, teams may recalibrate opportunities as necessary, build a detailed financial analysis, define the FSOM, outline necessary operational changes, and profile risks.
Often in divestitures there are transition services agreements TSAs set up between the buyer and seller for commingled operations. Managing simultaneous TSAs with varying durations can be complicated and can add risk to the acquisition.
Establishing a governance structure to administer these TSAs and facilitate a rapid exit, therefore, is crucial to both parties. Figure 2 shows a sample TSA governance structure.
A robust TSA governance structure reduces the overall administrative burden on the buyer as it focuses on the transition.
For the seller, it reduces the number of requests for TSA changes and extensions of duration while allowing a faster full separation. For more about TSAs, see Part 2 of this series. A few weeks prior to deal completion, a "war room" should be established to report and resolve transition issues.
The period of hypercare will vary, depending on the size and complexity of the newly acquired asset, but it typically lasts two to four weeks. Hypercare is both cross-functional, impacting supply chain and other functions—such as information technology ITfinance, and commercial—and global, impacting all transitioning regions.
The exercise of preparing for hypercare will confirm that the help desks have been made aware of the hypercare period, and that they will continue to use their existing lines of communication. It also will make certain that key subject-matter experts will be made available to resolve high-impact issues.A Masters in Supply Chain Management will establish you in your career as a supply chain leader with skills and required competencies.
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