Mixed views over mergers

9 May 2007
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10 May 2007 | Antony Barton

Buyers are divided on how mergers and acquisitions (M&As) between suppliers affect their profession.

Some 34 per cent of readers in the latest SM poll of 100 buyers said M&As between suppliers benefited procurement, while 36 per cent disagreed.

The results followed a flurry of takeovers including one of the world's largest privately owned print suppliers, Flint Group, acquiring Day International, a manufacturer and supplier of printing materials. Dennis Wolters, who will remain CEO of Day International, said the combined range of products would create an "exceptionally strong" portfolio for printers.

Buyers said mergers typically produced a better range of products or services, while allowing the supplier to extend the best technology from the combined companies across the whole organisation. Economies of scale and supplier rationalisation can also provide cost savings that lead to lower prices.

Several readers said a larger supplier was more likely to be an effective provider of a long-term strategic relationship or a "one-stop shop" for all the buyer's needs.

Yet some pointed to the disruption caused during a merger and said, while a buyer might have been an important customer for one supplier, they may be less so for the merged company. Nic Porter, head of procurement for merchandise firm 4imprint, has a negative view of M&As after a takeover between packaging suppliers in a previous role: "The new combined company set about integration and rationalisation programmes, which led to a deterioration in customer service and increased costs."

A large supplier that dominates the market can also lead to reduced negotiating power for customers. But one buyer said this was an opportunity for buyers to demonstrate their worth: "Negotiation is a key procurement tool and buyers not skilled and experienced in this art would find themselves at the mercy of unscrupulous salespeople."

SMmay2007

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