In today’s ultra-competitive business environment, mergers and acquisitions are not just high-profile events - they represent crucial inflection points that can transform entire industries. Recently, there have been several significant M&A activities impacting companies with a presence in the Pacific Northwest, including the Alaska & Hawaiian Airlines merger and the potential mergers between Kroger & Albertsons and OHSU & Legacy Health. Imagine for a moment that you run a mid-sized coffee company who sells through supermarkets, and supplies to regional airlines and hospitals. These recent consolidation activities could force your coffee company to reevaluate your strategy and operations for three different industries all at once. That is a lot of change!
These recent mergers are a useful reminder that M&A can significantly impact stakeholders in any industry and at any level of the supply chain. It is critical for companies to consider how such activities might affect them, even if they are not directly involved in the M&A (as was the case with your mid-sized coffee company). Below, we explore a few areas that any company should be thinking about in the event of M&A activity in their industry, along with some useful actions you can take to proactively prepare.
- Embracing Uncertainty and Change: Merely the announcement of possible M&A activities can bring about significant uncertainty. Whether you're a supplier, competitor, employee, or stakeholder, the primary question on your mind understandably becomes “what could this change mean for me?”. Given that the potential impacts can be quite broad, we’ll look at this from the perspective of people and processes & technology.
- People: Employees are certainly reading the headlines and perhaps thinking about their own role and career prospects. It is important for leaders to ensure employees feel valued, to communicate key information in a timely and transparent manner, and to anticipate potential people impacts well in advance of any major changes.
- Process & Technology: M&A activity may lead to necessary changes to your systems and processes as you might need to interface with a different set of external tools, though the specifics of these changes will likely be unclear initially. To prepare, it can be useful to ensure that your current set of processes and tools are well-documented and fully understood. This will help you to adapt more quickly should changes be necessary.
- Navigating Transitions and Integrations: These are highly visible, high-cost activities; particularly when they involve key customers or partners. Transitions and integrations require deliberate strategic planning and complex delivery coordination, often with cross-functional and most likely geographically dispersed teams.
- Strategic Partnerships: If one of your customers is acquired, you may need to establish new relationships, negotiate new contracts, and adjust your operations to align with a new set of policies. This can be complex and costly, so proactively reconnecting with your strategic partners and critical stakeholders can be an effective way to mitigate these challenges as strong relationships with these key players can facilitate smoother transitions and improved collaboration.
- Financial Pressures: Industry consolidation could also lead to longer-term revenue and margin pressures as larger organizations typically leverage their size for more favorable terms. Proactively conducting a financial & operational health assessment can provide valuable insights, identify potential vulnerabilities, and help you understand how market events may impact your organization’s key performance indicators.
- Building Risk Resilience: M&A activity in your industry can also elevate your corporate risk profile, affecting broad aspects of your organization.
- Enterprise Risks: Identifying and evaluating new or increased risks associated with M&A is crucial. This includes a potential review of your enterprise risk management framework to understand how these risks might impact your industry, stakeholders, and operations.
- Mitigation Strategies: Developing a comprehensive view of relevant risks and taking steps to mitigate key risks will help ensure your organization is well-positioned to handle potential changes in your industry. This proactive approach can enhance your resilience in the face of industry shifts.
As M&A continues to shape industries large and small, it is important to understand the potential people, process, and technology impacts so that you can be prepared for the unexpected. By swiftly addressing uncertainties with your people, forging stronger relationships with your strategic partners, and taking a holistic view of enterprise risks, your organization can take meaningful steps towards becoming more resilient.
How is M&A activity affecting your industry? What steps is your company taking to prepare? Contact us if you’d like to discuss your priorities and stay tuned for a series of articles highlighting a few of these strategies in greater detail.
