Realizing Food Wholesaler Merger & Acquisition Synergies

There’s no doubt that business has gotten tougher. Widespread corporate acquisitions (i.e., Sysco’s announced acquisition of US Foodservice), globalization and personalization are driving the need to be bigger, better, farther-reaching, more personal, faster and cheaper in an ‘ever-changing’ competitive environment. Additionally, computer breaches, hacking & accounting scandals have led to intense scrutiny. In the U.S., the fallout has mandated compliance with new rules & regulations, with corporate oversight by the government. Small business customers increasingly prefer more personalization, convenience and service but at the same or lower cost. Economic conditions and fierce competition are forcing a move from fixed to variable cost models – challenging the viability of the antiquated cost plus models still around. The pressure to speed return on investment and time-to-market remains as urgent as always.

It is time to acquire or be acquired. After the deal is now time to gain some or all of your ‘approved’ merger synergies by completely integrating your companies into a single entity. Merger & acquisition projects are ‘technology-dependent’, highly cross functional and organizationally interdependent. Many times they require “heavy lifting” – typically understated in the initial due diligence.

Realizing full merger synergies not only requires rigorous financial & accounting due diligence customer, supplier & product rationalization; but entails planning, support and delivery across all supply chain components, business operations, organizations, IT systems, product lines, channels & categories.

It also includes the simplification, rationalization and prioritization of the following:

  • IT infrastructure & application portfolios
  • Supply chain network components and physical distribution facilities, depots & hubs
  • Item, Product, Sales, Customer and Vendor Master Data Rationalization
  • Integrated Business processes and rationalized organizational roles & responsibilities to support the new entity

The result is redesigned, simplified & integrated business for the new single entity – across all supply chain components, organizational units, product lines & channels (independent of any geographical or physical constraints.)

The ‘merged’ organization should be able to execute all business processes & functions: finance & accounting, treasury, sales, customer service, business development, marketing, merchandising, procurement, warehouse, distribution, transportation & fulfillment, etc. within a ‘single’ entity.

Typical synergy benefits include:

  • Between 200-600 bps in margin improvements; varies by channel & product line
  • 10 – 50% Inventory Turn improvements depending on new business model & supplier role
  • A one time reduction of inventory levels
  • Reduced inventory carrying costs
  • Operating, Facility, Payroll, Benefits and G&A expense reductions
  • Sales, Accruals, Rebate and Tax improvements

Additional synergy levers include:

  • What will be the role of the recently consolidated suppliers’ in the new single entity (partnering, cost take-out and delivery)?
  • What sort of collaboration will be needed to succeed under the new model?
  • How should the procurement and merchandising mechanics work in the new entity?
  • What are the opportunities and challenges posed by the recently acquired new product lines?
  • What does best-in-class merchandising look like for various categories in these new lines?
  • What are the other best practices that the new entity should adopt?

We have assessed & addressed these synergies and can discuss the potential implications with you.

Posted in: Merger & Acquisition

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