“Procurement: Delivering Improved Company Valuation” – BravoSolution White Paper

BravoSolution sponsored a roundtable the other day chaired by noted analyst, Andrew Bartolini of Ardent Partners, to discuss a new Paper written by Daniel Quinn of Bravo. It's titled “Procurement: Delivering Improved Company Valuation” and it does exactly what is says on the tin... you can download it here.

I first saw this approach used effectively some years ago, not long after I joined the Dun & Bradstreet Corporation. At that time, D&B was madly expanding by acquisition (it broke itself up again a few years later...), and the group included AC Nielsen, software firms, Moody’s, the Gartner Group, Thomson Directories etc. So there was a pretty strong culture around M&A activities, company valuations, and so on.

Regina Paolillo was a very smart finance and operations executive with Gartner when they came into the D&B family – D&B bought a stake, but Gartner maintained their own stock market quote.  I worked with her on a few projects, but it was when we had to present to a very senior internal meeting that she really impressed me.  She talked about how and where Gartner could take advantage of the D&B group deals that we had in place.

“So”, she said, “the projects and the group contracts we’re working on with D&B procurement folk will save us $5 million a year we estimate. Now based on Gartner’s current PE ratio of 30, that saving increases the value of the Gartner Group by $150 million”.

Wow! That got people’s attention. A room full of top execs suddenly got very interested, thinking about the value of their share options.   This wasn’t just a one-off couple of million saving. This was making the shareholders (including many employees) $150 million richer!  And that was how Paolillo, because of her finance background, saw procurement and cost management activities. If sustainable – and if they weren’t, they should be - they increased the value of the organisation by a significant multiple of the “saving”.

Back to the White Paper – its theme is how procurement activities can do at least as much as sales and marketing to boost the firm’s bottom line, profitability and valuations.  Quinn goes into some different ways in which organisations can drive value, and includes a useful process for achieving this – starting with “managing expectations” and ending with “effective contact and supplier performance and relationship management tools...”

His conclusion is spot on  -

“investments made in procurement capabilities and tools often lead to sustainable long term benefits and contribute significantly to the company’s bottom line. For organisations this can mean dramatic improvement in valuation and share price”.

I’ll feature more from the roundtable soon.

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