Procurement Strategy - Premium Content

20 Tips to Maximize Private Equity, Investment and Strategic Buyer Outcomes (Part 7: De-Risk Deals for Buyers, Do Fund/Buyer Homework, Allow Access During Due Diligence) [PRO]

In this Spend Matters Nexus brief, we’ll look at Tips 16, 17 and 18 (out of 20) for maximizing both the exit process and outcome (from a seller perspective) when engaging private equity or strategic buyers from an M&A perspective. Today, we turn our attention to three areas: how to “de-risk” a transaction for investors (including everything from foundational de-risking approaches to more advanced models), how/why to do your fund/strategic buyer homework to bring the optimal set of suitors/buyers into a process, and affording the optimal level of access/diligence to buyers and their transaction advisers. So far in this Nexus series, we covered the initial tips to prepare for the process itself (see Part 1 , Part 2, Part 3, Part 4, Part 5 and Part 6).

Jason Busch is the Managing Director of Spend Matters Nexus, a membership, research and advisory organization serving technology acquirers (private equity, corporate development, etc.) and CEOs in the procurement and finance solutions marketplace (including contract management, B2B marketplaces/connectivity, indirect procurement, services procurement, direct procurement, commodity management, payment, trade financing, GRC/third-party management and related adjacent sectors).

20 Tips to Maximize Private Equity, Investment and Strategic Buyer Outcomes (Part 6: Acquisition Strategy and the ‘End Game’) [PRO]

In this Spend Matters Nexus series, we’ll go over Tips 14 and 15 as we continue to explore the ways for sellers to maximize private equity, investment and strategic buyer outcomes in the procurement solutions market and others. Now, let’s turn our attention to two areas: the importance of fleshing out an acquisition strategy and roadmap — and “knowing the end game” in terms of likely future buyers after the next phase of the company’s growth. In our exploration, we share the best practices and not-so-best practices that we have observed across the hundreds of transactions we have been involved in.

So far in this Nexus series, we’ve covered the initial 13 of 20 tips (see Part 1 , Part 2, Part 3, Part 4 and Part 5). Let’s check out Tips 14 and 15 now.

Jason Busch is the Managing Director of Spend Matters Nexus, a membership, research and advisory organization serving technology acquirers (private equity, corporate development, etc.) and CEOs in the procurement and finance solutions marketplace (including contract management, B2B marketplaces/connectivity, indirect procurement, services procurement, direct procurement, commodity management, payment, trade financing, GRC/third-party management and related adjacent sectors).

20 Tips to Maximize Private Equity, Investment and Strategic Buyer Outcomes (Part 5: Bankers, Added Metrics and Differentiation) [PRO]

In this Spend Matters Nexus brief, we’ll look at Tips 11, 12 and 13 (out of 20) for maximizing seller outcomes for private equity, investment or strategic transactions.

Collectively, the Spend Matters team has analyzed hundreds of solution providers in the past two decades from a corporate development and private equity lens. We’ve also been involved on the other side of the transaction table as well, with sellers. Based on that experience, this series represents the comprehensive advice we would give sellers before a transaction to achieve the most advantageous outcome.

Today, we turn our attention to three areas: investment bankers (where they add the most value vs. not); the benefits of established “added” metrics to track the business; and explaining and justifying competitive differentiation in a manner that investors will believe (or not).

So far in this Nexus series, we covered the initial 10 tips to prepare for the process itself (see Part 1 , Part 2, Part 3 and Part 4).

Jason Busch is the Managing Director of Spend Matters Nexus, a membership, research and advisory organization serving technology acquirers (private equity, corporate development, etc.) and CEOs in the procurement and finance solutions marketplace (including contract management, B2B marketplaces/connectivity, indirect procurement, services procurement, direct procurement, commodity management, payment, trade financing, GRC/third-party management and related adjacent sectors).

20 Questions On Supplier Network Selection (Part 1) [Plus +]

Editor's note: This Spend Matters Plus brief is a refresh of our 2013 series on supplier network selection, which originally ran on Spend Matters PRO. 

The supplier network and business connectivity landscape has evolved into a world where simply staying on top of all of the on-ramps to systems and commerce is challenging enough — let alone selecting and implementing actual networks and having them to talk to buy-side systems and each other. We’ve come up with roughly 20 questions that customers should consider as early as possible when developing a business case and selection approach to the different tools that are available.

20 Tips to Maximize Private Equity, Investment and Strategic Buyer Outcomes (Part 4: You Can’t Hide the Customer Voice) [PRO]

The Spend Matters analyst team has collectively been involved in dozens of transactions in the procurement solutions market in recent years. From our vantage point, especially in the due diligence area, we have seen firsthand how most sellers only partially prepare to maximize their upside to come out of a transaction/investment.

This Spend Matters Nexus brief provides insight into how a company in the procurement solutions sector (and others) is likely to be evaluated so that it can best prepare for a process. In our view, transactions do not have to be a zero sum game, as optimal synergies are best when planned, measured and then executed against.

So far in this Nexus series, we covered the initial nine tips to prepare — ideally far in advance — for the process itself (see Part 1 , Part 2 and Part 3). Today’s installment focuses on the voice of the customer — and almost singularly how important this factor is overall. Tip number 10: Knowing what your customers think (and how smart buyers, especially private equity, will discern the true state of customer satisfaction and metrics even without the support of the selling firm).

Many management teams are not aware of the lengths that acquirers and their advisers will go to in conducting advanced customer due diligence. This includes reviewing all available third-party information in the public (or “partial” public domain), such as talking to analysts, consultants/channel partners and, of course, reference customers themselves — whether sanctioned or not by the selling party. Their techniques might surprise you, as the voice of the customer is an indispensable due diligence component in mitigating risk, as well as helping quantify synergies and upside for a given deal.

Jason Busch serves as Managing Director of Spend Matters Nexus, a membership, research and advisory organization serving technology acquirers (private equity, corporate development, etc.) and CEOs in the procurement and finance solutions marketplace (including contract management, B2B marketplaces/connectivity, indirect procurement, services procurement, direct procurement, commodity management, payment, trade financing, GRC/third-party management and related adjacent sectors).

Community-based Procurement — Get a Buy with Some Help from Your Friends (Part 1) [PRO]

The Oxford dictionary defines “community” as “a group of people living in the same place or having a particular characteristic in common” and secondarily as “a feeling of fellowship with others, as a result of sharing common attitudes, interests and goals.” Procurement practitioners inherently have kinship with each other based on shared experiences, pain, rewards and knowledge/know-how. Being in the tribe means you can learn from this collective intelligence and apply it individually and locally.

But, what are the best ways for practitioners to gain the wisdom of the community? Certainly peer networking events (in person or virtual) are popular, but they can be time-intensive and difficult to justify on a hard ROI. Training, memberships, conferences, subscriptions and other discretionary expenses are the first to get slashed during budget cutting. The other related issue is that the knowledge being shared is scattershot rather than a focused knowledge transfer that delivers capabilities that will pay off toward some outcome.

Community-focused outcomes can take many forms (e.g., supplier diversity, sustainability, supply chain resiliency, innovation, quality, etc.), and these communities can have many “community owners” (e.g., associations, service providers, B2B networks, tech vendors and even practitioner organizations themselves creating communities with suppliers and other ecosystem partners), but nearly all procurement folks have a common goal: cost reduction.

If cost reduction is the goal, there are many levers to pull, but good old-fashioned buyer leverage through demand aggregation never seems to go out of fashion. The notion of collective buying power is certainly not a new concept. Agricultural buying cooperatives have existed for hundreds of years. And group purchasing organizations (GPOs) are certainly a tried-and-true strategy for procurement organizations, especially those outside the Fortune 500. We’ve written a lot about GPOs, and there are plenty to choose from that provide not just aggregated volume pricing, but also varying community-based services such as events, benchmarking and partner services.

While GPOs are great, the beast known as “digital” is eating, well, everything! So, we have to look at where tech providers are playing here. And even the idea of digitally enabled GPOs isn’t new. Ever heard of MobShop or Mercata? They tried to do automated demand aggregation almost 20 years ago and are now a footnote in the dot com dustbin. Even ICG Commerce (now Accenture) had a horizontal e-marketplace with a GPO component to it before it transitioned to its BPO model. Back then, Accenture and EDS formed ePValue and CoNext, respectively, as consortia buying groups within their client bases, but that didn’t pan out either.

Times have changed, though, and newer technology and business models are gaining traction. Back in that era, I was bullish on digitally enabled group buying and, more broadly, large buy-side app vendors harnessing the power of their collective installed base for economic benefit. I bemoaned that “enterprise application vendors with large installed bases are not bringing the leverage of group purchasing to their communities,” and posited that “many of these vendors have active vertical and horizontal user communities that could be leveraged into powerful group purchasing entities. Some vendors might choose to use as an attractive differentiator while others could offer it as a value-added service.”

Yet, while I’m happy to see so many evolving options in the market right now, there still are some areas for buyers to consider in building out their own ecosystem capabilities that may leverage various types of digitally enabled solution/service providers.

In this SpendMatters article, I’ll address the following:

* Evaluating practical group-buying options available in the market
* Looking beyond traditional GPO models for community-based value
* Examining how companies like Honda and Toyota use a community-based approach with their suppliers
* Broadening the focus from “community-based sourcing” to “collective intelligence” in procurement as a means to perform more scalable knowledge transfer than just traditional community approaches
* Examining our SolutionMap criteria element called “Community Knowledge and Collective Intelligence”
* Providing a snapshot into a serious multi-pronged effort that one vendor in industry is pursuing in this area — and should be considered the pacesetter

Without further ado, let’s jump into it ...

20 Tips to Maximize Private Equity, Investment and Strategic Buyer Outcomes (Part 3: Before the Process — Third-Party Validated Analysis and the Importance of Understanding the Strategic Buyer Landscape) [PRO]

Aside from companies already owned by private equity firms, it is the rare solution provider — or any company — that is selling to private equity, going out for a later investment round or seeking a strategic buyer that has prepared adequately for the transaction process in such a way that the efforts will fully maximize the valuation, terms and other factors in its favor. That is, unless it gets lucky, and to be fair, some folks get lucky!

As expert advisers — primarily to “buyers” — we’ve seen this phenomenon play out time-and-time again in the procurement solutions universe. But it doesn’t have to continue to be that way. This series is focused on leveling the playing field for more advanced sellers of all types, gained by sharing our lessons learned from over 20 years of involvement in transactions in the sector, and especially our work as advisers to private equity investors, nearly all of which are extremely methodical and rigorous in their deal screening and due diligence processes.

So far in this Spend Matters Nexus series, we covered the initial seven tips to prepare — ideally far in advance — of the process itself (see Part 1 and Part 2). Today we continue with the next two tips to pay particular attention to in the lead-up to a process (but still ideally before it begins). And later in the series, we will explore tips to leverage in the actual process itself, ideally once you’ve fully prepared ahead of time to maximize your chances of an optimal exit, transaction or investment.

Jason Busch serves as Managing Director of Spend Matters Nexus, a membership, research and advisory organization serving technology acquirers (private equity, corporate development, etc.) and CEOs in the procurement and finance solutions marketplace (including contract management, B2B marketplaces/connectivity, indirect procurement, services procurement, direct procurement, commodity management, payment, trade financing, GRC/third-party management and related adjacent sectors).

The CPO’s Conundrum (Part 4): Economic Instability [PRO]

In the first three installments of this Spend Matters PRO series (see Part 1APart 1B), we noted that a number of pressing issues are shaping procurement from the outside in, yet chief procurement officers (CPOs) are still primarily concerned with issues set by an inside-out agenda — that is, cost-cutting and supply assurance targets mandated by upper management. Our PESTLE analysis of factors shaping the modern CPO agenda identified broad trends like economic instability, globalization, changing digital business strategies and the need to address corporate social responsibility (CSR) as areas that procurement organizations need to consider if they want to truly tap and manage the opportunities (and risks) offered by external supply markets, starting with sustainability and CSR in Part 2A and Part 2B and digital business strategy in Part 3.

Today we move on to the third item topping the CPO’s outside-in agenda: economic instability.

20 Tips to Maximize Private Equity, Investment and Strategic Buyer Outcomes (Part 2: Before the Process — TAM and Scenario Planning) [PRO]

Many solution providers’ executive teams that we have observed are not as prepared to enhance their chances of optimal private equity, investment and M&A outcomes. This Spend Matters Nexus series provides insight from the thousands of hours we have spent working with private equity groups, CEOs and boards to evaluate acquisition targets — and with sellers to optimize exit scenarios and outcomes in the procurement solution market.

In the first installment of the series, we provided five recommendations to prepare wisely for an eventual process.

Today, we continue the analysis with our next tips to consider as the actual process approaches (i.e., “pre-process” tips). These include instructive recommendations on taking the time to build a total addressable market (TAM) model and scenario planning/rehearsing the actual process itself, including how to prepare and interrogate a “data room.”

Later in the series, we will explore the deal process itself, offering tips for stewarding the effort and driving to an optimal outcome.

Jason Busch serves as Managing Director of Spend Matters Nexus, a membership, research and advisory organization serving technology acquirers (private equity, corporate development, etc.) and CEOs in the procurement and finance solutions marketplace (including contract management, B2B marketplaces/connectivity, indirect procurement, services procurement, direct procurement, commodity management, payment, trade financing, GRC/third-party management and related adjacent sectors).

20 Tips to Maximize Private Equity, Investment and Strategic Buyer Outcomes (Part 1: Preparing Wisely) [PRO]

In recent years, we’ve spent thousands of hours working with private equity groups, CEOs and boards to evaluate acquisition targets — and with sellers to optimize exit scenarios and outcomes in the procurement solution market. In each M&A advisory or SolutionMap due diligence benchmark engagement, there has not been a single study in which we have not learned something new as a team. While from a seller perspective specific tactics can change over time based on conditions in the capital markets, the overall economy and other externalities (e.g., the current “dry powder” excess), there are well over 20 universal tips that we’ve identified that can apply in nearly all scenarios.*

So we decided to write this Spend Matters Nexus brief to share our top 20 lessons learned from the perspective of sellers’ to maximize their private equity, investment and strategic buyer outcomes (based on working “the other side” of the transaction). Today, we start with an initial five tips to prepare wisely (ideally) before a process begins. In the second installment, we’ll continue to share the next five tips for preparing wisely as the actual process approaches (i.e., “pre-process” tips). Then in Parts 3 and 4, we will jump to the actual deal process itself, offering tips for stewarding the effort and driving to an optimal outcome.

Jason Busch serves as Managing Director of Spend Matters Nexus, a membership, research and advisory organization serving technology acquirers (private equity, corporate development, etc.) and CEOs in the procurement and finance solutions marketplace (including contract management, B2B marketplaces/connectivity, indirect procurement, services procurement, direct procurement, commodity management, payment, trade financing, GRC/third-party management and related adjacent sectors).

Coupa’s 3 Special Forces Teams (Part 3: Value Engineering + Customer Success) [PRO]

In the final installment in our series covering Coupa’s 3 Special Forces teams (see Part 1: Corporate Development and Part 2: Alliances + Business Development), we cheat a bit from a series title perspective. And that’s because Coupa’s final special forces team essentially represent two functions in one (although they are in fact different groups): value engineering (sometimes called “value optimization”) and customer success.

Our analysis today begins by defining what value engineering and customer success functions do (and not do) for enterprise software/Saas/cloud companies. Then we provide the details behind Coupa’s programs. And finally we explore how Coupa leverages these two areas in ways that disproportionately benefit its broader operations in business spend management (BSM).

Jason Busch serves as Managing Director of Spend Matters Nexus, a membership, research and advisory organization serving technology acquirers (private equity, corporate development, etc.) and CEOs. The views expressed in this research brief are his and do not necessarily reflect that of the Spend Matters analyst team. But he would like to thank his colleague Pierre Mitchell for his review and input on this piece, given his deep experience in this area. Research note: This brief is based on extensive primary research. Beyond already available public information, no data or insights were provided by Coupa. However, a fact-check was provided to Coupa for informational purposes to ensure accuracy.

Digital Business Strategy: The CPO’s Outside-In Agenda (Part 3) [PRO]

In the first two installments of this Spend Matters PRO series (see Part 1A, Part 1B), we noted that a number of pressing issues are shaping procurement from the outside in, yet chief procurement officers (CPOs) are still primarily concerned with issues set by an inside-out agenda — that is, cost-cutting and supply assurance targets mandated by upper management. Our PESTLE analysis of factors shaping the modern CPO agenda identified broad trends like economic instability, globalization, changing digital business strategies and the need to address corporate social responsibility (CSR) as areas that procurement organizations need to consider if they want to truly tap and manage the opportunities (and risks) offered by external supply markets, starting with sustainability and CSR in Part 2A and Part 2B.

Today we move on to the second item topping the CPO’s outside-in agenda: digital transformation.

Digital transformation is increasingly creeping into a CPO's crosshairs because digitization is becoming a daily part of our personal and professional lives. Not only is software becoming critical for everyone in the organization to do their jobs, but the internet is becoming critical to sales and marketing to advertise and sell the product as well as to R&D to do research and engineering to control just-in-time manufacturing. Meanwhile, from a corporate strategy perspective, companies are aggressively looking at their digital business strategies — and consulting firms like Accenture, Deloitte, McKinsey and others are busy capitalizing on this. Distribution companies do not want to get “Amazoned.” (For example, Accenture is looking to next generation digital technologies to achieve it’s ZBx nirvana — and achieve sustainable zero-based spend in a zero-based supply chain.) Logistics firms do not want to get “Ubered.” Contract manufacturers want to become innovation incubators. And pretty much every finished goods manufacturer wants to embed telemetry to collect data and use it to improve customer satisfaction, increase top-line growth and pass the data back to the supply chain to improve operational efficiency.

Digitization is the new buzzword and just about every publication out there is talking about it, running articles on how to do it, and publishing “deep” exposes on the benefits of digitization. Best practice guides, case studies, futurist projections, and other in-depth studies are a daily occurence. Not all are equal, not all are relevant to your organization, and not all are even accurate. But that’s beside the point. Digitization is here, and its influence is only going to grow. So rather than sit back like a luddite and bemoan the coming wave of pink slips due to automation, CPOs need to rally their organizations around digital to help them see the benefits new technologies can bring (as tactical process cost reductions can always be invested in strategic value generation efforts if they use these same technologies to make the case, a case that does not necessitate a reduction in workforce, just a shift from the tactical to the strategic).