Pfizer and AstraZeneca – procurement implications of potential take-over

Pfizer, the giant US-based pharmaceutical company, has made a hostile takeover bid for UK-based (but also highly international) AstraZeneca, valuing the company at £63 billion. AZ has said ‘no’, the politicians are debating issues around national interest and shareholder independence, and City firms are rubbing their hands together at the prospect of bumper fees for everything from financial advice to PR and even printing services.

But how does it feel at the moment to be a procurement person in AstraZeneca or Pfizer?  Well, being on the receiving end of a bid is always worrying, but it also can’t help being exciting too (as I found being in the middle of the legendary RBS takeover of Nat West, back in 1999/2000). Your business is in the newspaper every day! The adrenalin gets pumping! Suddenly people you meet are interested in what you do, and what you think! There are, however, obvious negatives too.

Some procurement staff in both businesses will start thinking about potential redundancy post merging of the firms and staff, which can be very scary or the opportunity to do something different and maybe more life-affirming. Others might even hope that a new set of bosses might actually be more supportive of procurement, or get rid of some of the dead wood...

So it is by no means a case that everyone in the target firm sits there weeping and wailing. Equally, not everyone in the aggressor will see it as a good thing (what if they have better people than us)? However, it is inevitably a time of uncertainty, and that can be stressful.  And it is one thing if you have a decent redundancy package and your skills are in high demand – but that doesn’t apply to everyone.

Guy Allen ran a Real World Sourcing briefing last year around ‘Preparing for Merger or Acquisition’ from a procurement perspective. He made some excellent points, many from his personal experience (including in the Pharma industry), both from the point of view of the acquirer and acquired. And he highlighted one vital over-arching  issue. Over recent years, post acquisition or merger savings from combined procurement have become a bigger and bigger element of the benefits promised and delivered through the transaction. Procurement has a key role to play, in other words, in making these deals work.

Allen also talked about the opportunity for procurement to re-position itself, to get the attention of the CFO and Board and use the change to drive a stronger procurement positioning. But time is limited – three months, he reckons. It is also key for all parties to “know your numbers” as he put it. You need to understand where procurement spend is going, by category, by supplier, by business unit.  If one party has much better spend data than the other, the likelihood is that their staff will come out of the process better, no matter who is acquiring whom.

If the data is reasonable, then even pre-finalisation, both procurement functions can be thinking about where opportunities might lie. Which categories lend themselves best to greater leverage? Can strategic suppliers be used across the new organisation? What are the implications for systems (P2P, sourcing, etc)? Preparatory work will pay off post deal.

On a final note, I personally went through all this with NatWest. At an individual level, most of my procurement team weren’t still there 18 months later. But some did stick around, including one of my mid-level category managers who is now in a very senior role with RBS. Others went off and now are CPOs at other financial services institutions and elsewhere. So change can be good, even if it doesn’t always feel like it at the time – good luck to all the procurement folk involved in the Pfizer / AZ process anyway.

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