Integrating Vendors From A Company Acquisition
Acquisitions take quite a bit of time, considering there are multiple facets of an organization that need to be integrated with the company acquiring the other. One of the top priorities when acquiring another business is ensuring adequate data integration - especially vendor integration. Your suppliers are key to the success of your operation.
Let’s say your company purchased another company with $250M of indirect spend with 1500 suppliers. You are asked to take the lead on integrating all of these vendors into the acquiring company. With 1500 suppliers, this is by no means an easy task. Fortunately, there is a process to follow to help expedite the process.
The Vendor Integration Process
It is important to note that the focus of this article will be on indirect spend vendors and the process for direct spend vendors will be a bit different. Having said that, here is the process you can follow for vendor integration:
Obtain a Spend Extract - The spend extract of your acquired company’s vendors should include the payments over the last three years, vendor name, vendor tax ID, cost center(s), business unit(s), contract(s), and contract end date(s). Get a spend extract of your company’s vendors (last 3 yr payments, vendor name, vendor tax ID, cost center(s), business unit(s)). Merge the 2 files together off of vendor name and tax ID. This report needs to be broken down so it is easily comprehensible and summarizes both unique vendors and common vendors, alongside the business owners from each company for each vendor.
Timeline Definition and Vendor Decision - You will need to decide on the goals and timeline to complete the integration. Include a cost savings goal on how much savings can be achieved by merging together the common vendors. Once this is complete, you can decide whether to terminate vendor immediately, move the business to a different vendor, use the same vendor and merge contracts, move the vendor over for an agreed time, or move the vendor over permanently.
Determine Resources - With all of the data flowing into the business, decide on what resources are needed for the transition. Legal will likely be the critical path and you may need to supplement legal contract resources. Legal, procurement, finance, and business owners from both companies will be among the top essential resources needed for your organization.
Vendor Integration Process - Set up meetings with business owners to decide on the vendor decision, in which the process will vary based on the outcome. If choosing to terminate, focus on the contract to determine how quickly it can be terminated and try to shut down as many vendors as possible. If decided to utilize the same vendor and merge contracts, review the contracts to merge together and re-negotiate due to additional spend leverage. Lastly, if you decide to move the new vendor over, transition to the new contract and set up the vendor in vendor master. If you need any contract support, ensure to engage Legal and utilize them within this process.
Metrics - Put an emphasis on what metrics you seek to track on a monthly/quarterly basis. This may be cost savings, timeline status, vendors completed, remaining vendors, and vendors in the queue (with procurement, legal, etc.)
It is critical to ensure the process is well-defined and aligned among all parties involved. If the acquired company’s business owners have a strong bias toward keeping vendors, it is important to shut down as many vendors as possible. Also, staff appropriately and understand your critical paths, which will likely be legal in this scenario. You will need to keep track of key metrics and have alignment meetings every week with legal and procurement to ensure the process is flowing smoothly, as this is a tedious process and can impact morale if dragged out for too long.
Expediting Your Vendor Integration
With all of the moving pieces within an acquisition, it's easy for critical items to take longer than needed. This is why it may be beneficial to consider a consult for facilitation with adequate subject matter expertise on vendor integration.
Mike Glass runs GPC (Glass Procurement Consulting), a procurement consulting firm focused on optimizing a company's spend. Mike has worked in senior procurement management positions at NVIDIA, Google, Meta, Fitbit, and Flextronics. Mike would enjoy getting your insight on any procurement topic, feel free to contact Mike at mike@glassprocurementconsulting.com.
