Analysts’ Corner: 3 lessons from M&A deals that can benefit procurement pros

Spend Matters Founder Jason Busch

Editor’s note: Spend Matters' analysts write about what they’re thinking in the Analysts’ Corner feature for our weekly email updates. On occasion, we will publish these insights for our wider audience. To read future Analysts’ Corner posts, sign up for our weekly email update.

Throughout my career, I’ve generally straddled two very different universes. First, as many of you know, as a procurement technology expert. But secondly, as a corporate development/M&A practitioner, specializing in the due diligence of technology firms in the procurement, finance and supply chain technology markets.

Working as a transaction advisor to help companies understand markets and providers — now using the great insights and data that the Spend Matters analyst team curates and develops — has been a career-long passion of mine. I started my post-consulting career in this area 20+ years ago when the amount of product and customer benchmarking data deployed against these initiatives was virtually non-existent. On many levels, I feel like a kid in a candy store having this much insight to leverage in my practice today.

Yet what I find most curious about M&A and due diligence is its relevance and lessons for procurement organizations — particularly as they evaluate technology options and make vendor selection decisions. A day does not go by where I do not draw a new analogy or lesson learned for procurement. Here are just a few orthogonal lessons that I’ve started to think about that I hope to explore further in the future:

  • Hunches can be misleading. We can intuitively make a decision (e.g., I like how a user interface looks compared to others so I want to pursue that product vs. another). But unless you are making a shortlist or selection decision based on hard data, at best you will be going on a good hunch. But data, such as deeper SolutionMap product and customer benchmarking data (and now Spend Matters TechMatch(SM) for selection) or similar insight from a Gartner, provides such a richer basis of comparison both for due diligence purposes but also selection ones. After all, Daniel Kahneman in part won the Nobel Prize in Economics in part for realizing even experts would often make poor decisions based on hunches! So like an investor, be as close to 100% data-driven as you can be!
  • There is no substitute for politeness. One thing I have learned working with private equity firms for over a decade is that most behave as gentlemen and gentlewomen in discussions and negotiations. When sponsors (investors) have bad news to give, they give it directly, but politely. Far too many procurement organizations, when buying just about any widget, service or technology, lack the same level of always-on diplomacy, especially when giving bad news to a supplier or potential vendor. At best, they are inconsistent in transparency, directness and reasonableness with all suppliers. And at worst, they are misleading. There is a ton here that procurement teams can learn from the best private equity firms — especially how they conduct themselves all the time. And even when they “push,” how they do so diplomatically (and in a data-driven manner — see above!) for the best possible outcome.
  • Have a plan for getting smart fast. Being in the market (for any category) requires market knowledge. Private equity firms, while typically not expert in any one area, are expert at coming up to speed quickly through defined processes. Procurement organizations could take a lesson from private equity market research and diligence processes about getting smart not just on macro-category considerations, but also how they can get “super deep” when in-the-deal. Hint: Speak to experts as much as possible, subscribe to the very best specialized research in a given area (vs. something more generic), and develop and test hypotheses with those that have a deep understanding in the supply market.

If these lessons are interesting to you — or you have others — please don’t hesitate to drop me a line!

I would love to hear from you.

—   Jason Busch,

Spend Matters Founder

Are you digitally transforming your company’s procurement organization? Start here and track your progress with the free Spend Matters Capability & Technology Roadmap templates for e-procurement, invoice-to-pay, sourcing, analytics, CLM, SRM & risk.

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