Spend Management and M&A

November 3, 2006 3:45 PM | Categories: Visibility, Spend Management

For years, I've been harping on the power of Spend Management to help companies not only make the right M&A decisions before a transaction, but to help realize post deal acquisition synergies. During Ariba's analyst day, Mark Clouse, who runs Ariba's sourcing consulting organization, discussed how his company has worked with Kohlberg and other private equity firms to analyze acquisition related procurement synergies prior to a transaction. But private equity firms aren't the only ones looking at deals based on Spend Management savings opportunities. A range of acquisitive companies across industries are considering procurement related synergies and cost savings opportunities as they look at potential acquisition candidates. And they're often turning to spend visibility technology from a range of providers to help guide their analysis. What's made this possible? The rapid deployment capabilities of analytical packages from a new breed of software vendors such as BIQ can make initial analysis and data crunching a snap. Of course Ariba, Emptoris, Zycus, SAS, Verticalnet, Procuri and others also have related capabilities as well (but often with more of a solution-driven approach). Stay tuned later in November as I do a deep dive analysis on the analytics and spend visibility capabilities of all of the vendors that I just mentioned.

- Jason Busch

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speaking of m & a, are their still rumors circulating on ariba or verticalnet and a buyout?

# Posted By Aaron Rogerson | 11/3/06 5:23 PM

Yes, but it's important not to forget the existing portfolio companies. We are in contact with several private equity firms who are in the process of ramping up small centralized procurement organizations to track spending across their portfolio companies, and to leverage the aggregated buying power of their companies (in common commodity areas like PC's, contract labor, and office supplies) to negotiate better contracts than any individual portfolio company could negotiate on its own.

Not to mention the fact that maintaining a spend cube across the portfolio companies is a very interesting (and relatively painless) way not only to measure management efficiency, but also to return value back to management. We made this pitch three years ago to a Boston area private equity firm, and got the door slammed in our face ("Who will pay for this? Not us!"). Now, suddenly, we are being approached with the same idea we were trying to pitch back then. This turnaround in point of view is fascinating and refreshing.

# Posted By Eric Strovink | 11/3/06 7:02 PM

No more news on the Ariba rumor. I would assume the deal is not happening, though of course I could be wrong. Things seemed business as usual in Pittsburgh this week. On the VERT side, I'm surprised nothing has been announced. Maybe a delay? Maybe things are not signed off? Don't know. If anyone else has insight, please post.

# Posted By Jason Busch | 11/3/06 7:41 PM

Verticalnet has ramped up the hype machine of late with fluff press releases. They have also given no indication of releasing their quarterly numbers. Certainly strange activity for a company predicted to be acquired almost 1 month ago.