Mergers and Acquisitions – Centrica gets value from procurement involvement

Another good recent presentation at eWorld recently came from Centrica, who talked about how they have used the Iasta sourcing platform to improve a number of aspects of their procurement performance.

The element that caught my eye as being somewhat novel was around mergers and acquisitions. Centrica have made regular acquisitions in the energy and utilities markets, and "procurement used to find out after the event" as  Dave Harman, eSourcing Strategy Lead, Centrica said. But now, Procurement plays an integral role, and typically, procurement benefits account for more than half the total acquisition benefits.

Procurement is involved with pre-transaction due diligence, with examination of contractual commitments and driving post merger savings and benefits. And the Iasta technology "really plays a key role" in this - from capturing contract information via the Contract Management module, to use of spend analytics to identify opportunities.

I particularly liked this table / checklist of key activities, pre and post merger or acquisition, discussed at the session.

Pre Merger

Post Merger


·         Document organisational structures

·         Assess capabilities

·         Size cost synergies

·         Integrate procurement processes

·         Capture synergy savings

·         New procurement structures


·         Footprint of existing systems

·         Size cost synergies, establish tech plans for merger

·         Integration of procurement / technology

·         Embed strategic sourcing capability

·         Implement sourcing strategies based on prioritized categories

The use of a strong technology platform has driven some expected and some unexpected benefits. For example, introducing e-auctions into environments where they haven't been used before had driven savings, as we might expect . But they have also driven standardisation, and the transparency of outcomes has helped to overcome some of the inevitable post-merger tension around what we might call the "why hasn't my supplier won the post-merger contract"? That can cause tension if not handled well.

An objective and collaborative approach, driven by the technology, can "help to get over the tension of having two separate procurement teams coming together" according to Harman. Tension is usually based on misconceptions or past problems and failure - openness can overcome a lot of that. And that seems a good message to remember for anyone going through similar corporate machinations...

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  1. Category Dojo:

    Iin my previous life as a consultant, this was an area we did a lot of work in for private equity firms like LDC and ECI Partners amongst others, as well as firms that had either made recent acquisitions or had recently split from their parent company. In essence, it was a brilliant time to bring in consultants, as change was afoot regardless, thereby overcoming one typical resistance to consultancy. If things are going to change, you might as well do it right.

    Technology always played a big role. It helped bring something professional and fit-for-purpose to the table, instead of just the bigwigs. Particularly in the areas of indirect spend, there is typically a lot of volume leverage deals to be created, and the eAuctions played a pivotal role there. Even more important were the category planning and strategy workshops, in some cases even prior to the acquisition itself; the procurement strategy was fed back into the actual business case.

    Complications could arise when two firms of equal size and prowess merged together, each bringing their own procurement methodologies and technology. You could leave them be, but then you miss out on making efficiencies, or perhaps you create a hybrid approach that takes the best from each. Not an easy decision.

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