Insights from the merger integration

Kearney was brought aboard as advisor in the pre-close phase to assess synergy opportunities in the supply chain and procurement areas and to facilitate data sharing. During post-close we helped the new company achieve cost synergies in procurement, R&D, and direct materials. Looking back, the insights gained in this merger would help inform future mergers.

Identify synergies early, get results sooner. By setting the rules of engagement, we were able to interact with both merging companies separately before day 1, outline the integration steps, and identify high potential savings initiatives. On day 1, when all data-sharing restrictions were removed, the savings started rolling in quickly.
Pull in the right people. We used a global cross-functional team structure to pull in members from across both organizations, including from central functions, business franchises, and different sites of operations. We had 20 such teams, all working on integration strategies, identifying short- to medium- term supply chain synergy targets, and establishing a platform for long-term wins. Ensuring each side selected their “winning teams” was a key factor for success.
Gather data, diligently. Diligent data gathering and thorough analysis are always required in a merger, but never more so than when procurement is decentralized. In this merger, the direct materials spend was handled across 60 acquired sites and required a thorough analysis to achieve synergies and optimize the supplier base across areas such as active pharmaceutical ingredient (API), intermediate products, chemicals, packaging, and contract manufacturers. Tight, central coordination was paramount in getting this right.
Capitalize on the momentum for change. All mergers represent a unique opportunity to challenge established ways of doing business. It is a good time to capitalize on the momentum for change with an objective appraisal of both organizations, and to promote the leading practices whether they originated in the target or the buyer.

Impact and advantage

The foundation laid during the pre-close phase translated quickly into actual synergy opportunities. Within six months after the close, the company surpassed its first-year synergy targets by 70 percent. From an organizational perspective, procurement leaders agreed that the sharing of best practices was fundamental to achieving the savings and that the new company was well-positioned for long-term success.