$4B metals company identifies and quickly realizes merger savings

Situation:

A large metals company wanted to ensure they could begin delivering savings they committed to their shareholders from their proposed merger with a competitor as soon as possible after the deal was approved. This required that they begin analyzing the procurement operations and spend of each company while the merger was being finalized. Given the competitive nature of the acquisition, however, they were prevented from sharing critical competitive information, such as detailed spend and unit costs required to assess potential savings opportunities until after the merger was approved. To protect each company's individual data but provide the necessary analysis to identify savings opportunities and develop synergy plans, the company worked with ICG Commerce as an independent, neutral third party to analyze the data and recommend merger synergy initiatives, allowing them to develop plans that could be executed as soon as the merger was finalized.

Solution:

ICG Commerce conducted an assessment of each company's procurement operation and spend – both direct and indirect. Sharing the aggregate results of the analysis with executives from both companies, ICG Commerce worked with them to develop four strategies to drive cost savings in procurement: drive unit cost reductions through increased volume with existing overlapping suppliers, jointly source categories, develop internal transfer pricing options, and leverage the best of existing contracts.

Since the two companies were competitors, the largest savings opportunities were found in overlaps between their core direct suppliers. The company scheduled a supplier summit with over 75 key direct commodity suppliers to occur shortly after the merger was finalized. During the summit, the suppliers met one-on-one with the new company senior executives. The new company explained the combined strategy, combined spend volumes, and how each supplier could help the new company meet its savings targets.

Results:

The four separate approaches to drive merger synergies resulted in significant savings within 6 months. The supplier summit had an immediate and significant result, contributing over 20% of the total savings without the company having to conduct lengthy, detailed sourcing for these commodities. Identifying opportunities in the pre-merger finalization phase allowed the company to accelerate savings into their fiscal year and exceed overall company savings targets, making the merger a real success story.