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Buy and Plug: when procurement enables fast growth

Actualizado: 14 de sep de 2020

We have talked a lot about how M&As have made most of the large organisations we have got in today’s world. Sometimes by keeping the two brands after the deal, some others in by creating a new brand, and in some instances, by integrating the brands we acquire to the existing ones. It does not matter the type of M&A we analyse, the key points are always going to be around:


  1. Ability to identify synergies and opportunities pre-deal

  2. Agility to implement them post-deal

In this scenario, companies that are set up in a way they can integrate new businesses or be integrated into new businesses quickly, have a very big advantage. This type of mindset and approach is what I call “Buy and Plug”.

Buy and Plug means the ability to easily integrate a new business into the current operations and benefiting from the synergies that this will provide. Normally in 2 ways:

Sales:

  • Increase to sales via cross-selling

  • Increase to sales via expansion – product, target audience or location.


Costs:

  • Reduction to 3rd party costs

  • Reduction to labour costs.

Both of the above will ultimately be materialized into profit increases and growth. Running a Buy and Plug approach requires all the areas of the organisation to work in conduction with the ultimate goals of:

  • Keep things flexible enough to either add new business or switch rapidly to another way of doing things.

  • Have visibility and information about all processes, tools and systems.

  • A "transformational" mindset in the way of staff’s adaptability to changes.

  • Profit enabling behaviours where everyone is looking for ways of increasing efficiency across the business.

Procurement plays a key role in any Buy and Plug approach. On one hand, Procurement will be in charge of finding the right balance in between giving enough commitment and assurance to suppliers to get a good deal, and do not over-committing so that potential migrations can happen at any time. On the other hand, procurement will be in charge of running all the business cases around sourcing things in a different way.

It may happen that we know that a specific service is not worth it to be brought internally unless there is an annual requirement of X units. Imagine our current volume is far below X, but suddenly we buy a business which takes us to X. In this instance, it’s procurement role to 1) anticipate this situation and build flexible enough contracts, and 2) identify the opportunity, define the alternative, build the business case and implement it.

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