During a merger or acquisition (M&A), one area that’s often overlooked is vendor consolidation. And that’s a big oversight. This is especially true for wellbeing vendors, which encompass the many facets of wellbeing — physical, emotional, social and financial. M&A deals are an opportune time to review and consolidate vendors, leading to strategic improvements, cost savings and better compliance.
Navigating M&A is challenging enough without the added complexity of a fragmented vendor landscape. One of the most significant challenges is the lack of visibility into technology spend across an organization. Without a clear idea of where your money is going, it’s very hard to negotiate good terms or find ways to save money. Lack of visibility can lead to missed chances to optimize spending and can significantly impact your bottom line. For smart cost management, vendor partnerships need to align with the overall business strategy. Ease of administration, effective vendor integration, clear performance expectations and a great employee experience are key.
The task of managing relationships with many vendors, along with their invoices and contracts, makes operations more complicated and inefficient. Each vendor has its own set of requirements, billing cycles and contractual obligations, which can quickly become overwhelming. The administrative burden of managing these disparate elements drains valuable resources and distracts from the core objectives of the M&A process. Such operational chaos can slow down integration efforts and hinder the smooth transition of merged entities.
Beyond operational challenges and cost confusion, a fragmented vendor landscape poses potential security risks and compliance issues. With disparate vendor systems and varying data protection practices, ensuring consistent security measures becomes a daunting task. This can expose the organization to vulnerabilities, making it a prime target for data breaches. Maintaining compliance with industry regulations and data protection laws can also become a logistical nightmare, increasing the risk of non-compliance and associated penalties.
Even more important, during or after a business transaction, employees need to know where to get the help they need when they are feeling uncertain and stressed. They should know which vendors they can use for help with their physical, emotional, financial, or social wellbeing needs. To improve the employee experience, it’s critical to support employees to navigate to the right vendors at the moments that matter to them.
M&A activities provide a window for companies to reassess — and improve — their current vendor relationships. By streamlining vendors — and vendor management — companies can not only reduce costs and increase security, but also enhance overall wellbeing offerings for their employees.
Strategic discussions about wellbeing and benefits are a natural byproduct during the vendor analysis portion of due diligence. Whether you are in the early stages of considering a transaction or several years into integration, now is a good time to look at current plans, think about possible improvements and make sure all employees are getting the benefits that are important to them.
The vendor optimization process should start with a careful review and ranking of vendors based on their importance to business continuity and operational impact. By focusing on the most important suppliers first, companies can make sure that the consolidation process doesn’t disrupt daily business activities. This will keep the workflow steady during the change.
Consolidating vendors can reduce the number of contracts that need to be managed, which can streamline administrative processes and free up resources to focus on more strategic initiatives. In addition, consolidating vendors can increase purchasing power, leading to better terms and conditions. This can result in significant cost savings and improved contractual arrangements.
While there may be initial costs associated with consolidation, the long term financial benefits can be substantial. The optimization process includes identifying the strategic purpose of each vendor and expected outcomes, reviewing the terms, conditions, prices and service levels of each contract. This helps find ways to negotiate. It also lets companies use their combined purchasing power to get better discounts, extend payment terms and improve service level agreements. This can lead to reduced operational costs and improved vendor service levels.
We’ve seen firsthand how vendor consolidation can lead to significant savings. During a recent business transaction, a large global healthcare company saved a substantial amount by eliminating a high-cost vendor that was in place on both sides of the transaction, operating in more than 20 different countries. This isn’t an isolated case. Many organizations can achieve similar savings by strategically consolidating their vendors.
An M&A also provides an opportunity to review compliance issues and ensure that all vendors are meeting their contractual requirements. This is crucial, given the potential breaches some vendors may have had in the past. Due diligence during M&A should include a thorough review of vendor contracts and compliance. This is the time to ensure that vendors are meeting their obligations and that any necessary changes are made to align with the new organizational structure.
A central ‘front door’ for your vendors provides a simplified way for employees to navigate to all the resources available to them during and after a business transaction. This not only streamlines the consolidation process but also ensures that all vendor programs and services are well-organized and easily accessible. An integrated approach to vendor management can also help standardize data practices, ensuring more reliable and actionable insights. Above all, a vendor navigation system makes it easy for employees to find the services they need during the important moments to them.
We know that clear and effective communication is key to managing the complexities of vendor consolidation. Open and transparent discussions with internal stakeholders help align expectations, define roles and keep everyone informed about the consolidation timeline and goals. And maintaining open lines of communication with vendors fosters a collaborative atmosphere, helping to negotiate favorable terms and secure their support throughout the transition. By working together, organizations can reduce resistance and ensure a smoother integration process.
A transaction can be a perfect time to review and optimize the many vendors organizations have in place to support the health and wellbeing of employees. It’s the right time to look at and improve your vendor offerings — making operations easier, reducing cost and risk and improving the employee experience.
