Last week, ISM quietly announced via the newswire (without a note to its members), that it had acquired the North American practice and assets of ADR (ADR North America), inclusive of ADR North America's China business. My UK colleague Peter Smith (a former CIPS chairman) and I had the chance to catch up with ISM's Paul Novak (CEO ISM, ISM Services, Inc. and ADR-ISM China) and Bill Michels (President, ADR North America, President ADR-ISM China and ISM Senior Vice President) following the acquisition. Curiously, we both learned about the deal not from ISM (or the newswire), but from other contacts. In my case, another ISM member asked for my insights and thoughts on the deal (which caught me off guard, as you might imagine).
As a somewhat Germanic aside (credentials, credentials, credentials), if you're curious, the two ISM executives -- both of whom make for great company and conversation, on topics ranging from the future and role of indexes like the PMI to the ideal role of associations and training in the procurement profession – share five (!) certifications between them: CPSM (both) and C.P.M., A.P.P., MCIPS (Paul Novak). Talk about a qualified duo. But more important for our purposes today, the announcement initially confused a number of ISM and Spend Matters readers, many who read about it without the context of understanding the practice area and size of ADR -- not to mention to future goals of the new organization.
Before exploring these elements in more detail and clearing the air around any confusion surrounding the acquisition and new company formation, it might be helpful to share a bit of history. ISM and ADR North America (the US licensee of ADR International) have collaborated for some time. For instance, the ISM-ADR School for Supply Management was established in January of 2009 through a cooperative agreement between ISM and ADR North America.
Incidentally, this training organization, which was previously staffed with ISM and ADR resources, will now be taken in house within ISM. It will not be managed by the new business. The new business, formed from the assets of the acquisition, ISM Services, Inc., was incorporated in December of 2011. To provide even more detail, ISM Services Inc. (i.e., the new "for profit" company) purchased ADR North America and its subsidiary ADR-ISM Supply Management Consulting (Shanghai) Co., Ltd.
Paul and Bill shared that the "ISM Services, Inc. subsidiary ADR North America will still be a licensee of ADR International intellectual properties, including web-based sourcing and supply chain skills analysis tool." In other words ADR North America will license the intellectual property of ADR International, in the same manner in which it has previously.
Previously, ADR had 20 consultants "around the globe" and 50 contract consultants with specialized skills and expertise in North America. The new venture will leverage this network in a contract manner, accessing skills and expertise as required. However, ADR International (including the UK, Eastern Europe, Australian and South African operations) will operate independently, however there will still be sharing and collaboration of resources and intellectual property.
Paul and Bill told us that the transaction and creation of a for-profit company will bring a range of benefits to ISM, including the ability to better manage costs in a tax efficient manner. But most important, the venture will bring much back into ISM not from a financial perspective, but rather it will make the organization more valuable to its members from a research and IP perspective.
Paul noted that "the consulting part [of the venture] brings to us an opportunity to gain insight and knowledge into what is going on in the field" on a pragmatic basis. The vision is that the venture will impact ISM's research (including CAPS Research) and programming in a positive manner to put the organization in closer touch with the fast-moving procurement environment impacting members every day.
Stay tuned as our reporting and analysis of the acquisition and creation of ISM Services, Inc. continues, including what the transaction and company formation means for ISM members, other consultancies and global ISM initiatives (e.g., China).