Mergers and acquisitions provide significant growth opportunities. But supply chain challenges exacerbate post-transaction difficulties.
Key Takeaways
- M&A deal volume was 9% above pre-pandemic levels in 2022
- 7% higher shareholder returns for M&As in recessions
- 70-90% of M&A deals fail due to integration issues—including supply chain challenges
- Avoid common M&A supply chain challenges with supply chain flexibility
The mergers and acquisitions (M&A) market boomed in 2022. Despite market conditions, 2022 deal volumes were 9% above pre-pandemic levels.
Enterprises continue the trend this year, even with increasingly turbulent markets. And market downturn transactions typically succeed. Companies that acquired another business during the 2001 recession saw 7% higher shareholder returns.
Consumer goods companies diversify through M&A #
Consumer goods (CG) companies strategically acquire emerging brands to diversify their offerings. Small brand deals account for 75% of M&A volume among top consumer goods companies, up from less than 50% a decade ago.
Between 2019 and 2021, the M&A deal value in the beverage industry rose from $15 billion to $25 billion. Upstart brands entered the market, and venture capital poured into the industry, causing substantial consolidation. Brands widened portfolios and captured market share by capitalizing on popular new products.
M&A deals face supply chain obstacles #
Acquisitions aren’t always successful—70-90% fail. Often, it’s due to supply chain integration issues. Following a merger, individual supply chain challenges fuse, often causing larger challenges than each company faced individually.
Some common challenges:
Managing aggregate customer orders
Eliminating supply chain inefficiencies
Maintaining delivery standards
Prioiritizing valuable SKUs
However, they provide an opportunity to reassess logistics functions to find efficiency. Leading brands maintain key competencies like manufacturing quality, inventory control and delivery promises.
Reassess logistics networks #
After an acquisition, leading companies lower costs. Transportation is the largest spend in the supply chain, accounting for 40%-70% of total logistics spend. They also optimize warehousing networks to lower transportation by selecting optimal facility sites. Companies can reduce miles traveled—a significant cost driver.
An optimal logistics network also allows businesses to meet customer expectations more regularly. Retailers increasingly expect to meet “fast and free” consumer delivery promises. Sixty-nine percent of shoppers abandon orders over shipping fees, while 35% do so over slow delivery speeds.
Review inventory productivity
#
Inventory dominated the supply chain news cycle in 2022. Shippers held more stock than ever. As a result, inventory-carrying costs rose 25.9%.
Retailers and brands reviewed inventory productivity metrics as a remedy. Additional SKUs can increase inventory costs, specifically holding costs. Money spent to maintain stock amounts to an extra 15% to 40% of product cost per year.
During the post-acquisition phase, successful brands rethink their product mix. Eliminating lower-value SKUs makes room for higher-performing SKUs. The exercise reduces stockouts and lowers inventory costs by 10%.
Supply chain efficiency with Flexe Logistics Programs #
The key to thriving post-transaction: Rethink supply chain solutions and invest in flexibility. Traditional supply chains aren’t designed for rapid integration post-transactions.
Optimize distribution with Flexe Distribution Programs #
Flexe Distribution Programs allow enterprises to extend distribution networks and respond to customer demand while minimizing stockouts and reducing transportation costs. Due to increasing rates, despite less demand, this competency will remain critical for post-transaction companies. Businesses that deploy inventory closer to manufacturing centers, retail locations and partner intake centers replenish goods more efficiently and cost-effectively.
Meet customers’ eCommerce expectations with Flexe Fulfillment Programs #
Flexe Fulfillment Programs help enterprises place goods closer to consumers and reduce last-mile delivery costs while meeting customer delivery expectations.
Consumers expect products faster than ever. It is essential to meet these standards in the competitive post-transaction landscape. Seventy-six percent of consumers say free shipping is important, and 55% say the same about fast shipping. Sixty-six percent of retailers now offer next-day delivery in 2022 versus 48% in 2020.
Add fulfillment centers fast without the risk of traditional, fixed solutions. Improve customer delivery promises without Capex investments, fixed costs or long-term 3PL commitments.
Rethinking supply chain strategy
#
Instead of making big, fixed Capex investments, leaders focus on supply chain technology and networks designed to create structural supply chain flexibility. Organizations that invest in structural flexibility reduce significant supply chain costs. They strategically invest in technology and networks instead of fixed assets and leases.
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