In order to successfully acquire or merge with another company, organisations must ensure their acquisition plan keeps purchase-to-pay processes at the top of their project list to avoid time-consuming and expensive setbacks.
Companies typically conduct mergers and acquisitions for a few reasons:
to strengthen their competitive advantage in their market,
to enter into new markets or market segments,
or acquire new products or market share.
But, the ultimate purpose of mergers is to achieve economies of scale in the business and accelerate revenue growth.
According to PwC, consolidating multiple corporate business processes embedded in multiple IT systems is a top integration challenge for sizeable businesses. Failing to define the strategic objectives of an integration project upfront and neglecting to put P2P at the forefront can result in:
Disconnected initiatives that fail to deliver business value
Stagnated business processes since employees don’t know how to conduct business in the new environment
Confusion with incoming supplier invoices and underlying agreements
Potential increase in maverick spend as again, no processes are outlined
Delayed or duplicated financial processes, ending up in wasted time and money
Procure-to-pay (P2P) and order-to-cash processes are key processes in maintaining business as usual. Adopting these business processes early on minimises disruption and helps achieve cost synergies faster. Fast and thorough integration of financial systems helps capture cost savings and get on a revenue growth trajectory more quickly.
As corporations enter into the post-merger phase, the project office will need to quickly decide on the short list of systems and processes to renew, consolidate, and integrate. A big part of this decision is evaluating current business systems and processes against their influence on cost savings and future revenue growth.
To achieve the planned cost synergies, it is critical that the new company can gain spend visibility across all operations, consolidate their processes, and manage spend. The sooner the merged company can return to business as usual in the new structure, the faster the value of the merger can be realised. Businesses that put P2P integration in the backseat can expect challenges in capturing the financial benefits of the merger and acquisition (M&A).
Delaying process consolidation and spend visibility costs money every day. People make suboptimal decisions, the company pays for duplication of effort, business partners are confused and the expected return of investment from the merger takes longer. All these problems not only hurt the finance department, they also impact other business units, and eventually the entire company. Find out more about the implementation and challenges of P2P.
Merging businesses can end up having multiple agreements in place with the same supplier, and it is no longer clear what terms should be used, and what team should carry out payment. Not to mention, when users are processing workflows through different systems, spend visibility gets further fragmented.
In a new – and bigger - company, more time will be spent aligning and agreeing on the business practices while integration is going on. If P2P process redesign is deferred, end users need to learn multiple purchasing and invoice handling processes. This can result in confusion, wrong financial decisions, and excess corrective actions in the finance organisation. As the new business continues to run multiple instances of the same process, holding on to an overlapping workforce in the finance function prevents meeting the hard savings target. At the same time, several exceptions will increase due to the changes in business environment and maintaining productivity targets gets harder.
If redundancies cannot be eliminated in the supplier network by ‘rightsizing’ the supply base, people and business lines continue to buy as before. The company is unable to take advantage of new economies of scale, and the short-term savings are not captured. People go back to their old routines and preferred vendors. Plus, let’s not forget that running multiple IT solutions simultaneously is also costly.
Failure to right-size the workforce by removing overlapping functions can result to continued excess labour costs. If the ROI of the merger relies on economies of scale in production or sourcing, failure to establish proper visibility over the company spend can risk the overall business case of the merger. This lack of visibility equates to potential risks, especially if invoices are being processed by different people using different systems and processes.
Failing to consolidate the merging companies’ sales and finance processes can delay the execution of orders and payments. Disparate P2P processes in multiple IT systems is inefficient and can inhibit planned corporate growth.
Assess the entire Financial & Accounting solution landscape at the pre-merger phase, including purchase-to-pay and order-to-cash processes with Basware Business Consulting
Evaluate purchase to pay as a critical business process to meet the financial objectives of the merger
Consolidate spend of the both companies to one analytics view to analyse spend structure in Basware P2P
Identify overlaps in supplier base and spending, consolidate and renegotiate contracts with better terms
Develop a new P2P strategy based on the right solutions, and harmonise P2P process with the ERP renewal
Henderson Global Investors is a leading independent global asset management firm and is one of Europe's largest investment managers with over £65 million of assets under management and employing around 1,014 people worldwide.
Over the past ten years, Henderson underwent a couple of large mergers and acquisitions which led to the recognition that they were stretching their current financial system (Coda). This triggered a decision to conduct a large-scale financial system replacement project, replacing the core financial system and other peripheral systems, many of which were over a decade old, and to update their manual processes where staff spent a significant amount of time on low value tasks.
Henderson chose to partner with Basware for Accounts Payable Automation and Procurement as well as the Basware Network for e-Invoicing and Scan & Capture in order to gain spend visibility, reduce late payments, enable early payment discounts, and reduce transaction handling costs by updating their inefficient manual processes.
Acquisitions can seem overwhelming, but with the right purchase-to-pay solution with strong ERP integrations it doesn’t have to be. Learn more about Basware’s easy P2P integrations in our factsheet. And if you have any questions, contact us.