Over 15,000 merger and acquisition deals took place in 2017. This trend, being driven by consolidation and verticalization, has made itself present in nearly every commercial industry from Healthcare to Retail. The acquisitions are reshaping entire industries, for example the Food industry with the Amazon, Whole Foods deal. Could the next step be a consolidation of suppliers? If so, how would businesses prepare themselves to navigate those dynamics? Cortera recommends these 3 strategies for taking a proactive approach:
Monthly Portfolio Reviews
Performing monthly portfolio reviews on top of daily alerts and monitoring can help businesses stay ahead of any changes in risk. There are multiple key indicators that should be monitored to evaluate a supplier’s growth, activity, and potential risk as a key contributor to the supply chain. By comparing any changes month over month, companies may discover larger changes in their supplier’s activity over time. Having the right information at the right time will help businesses make better decisions about where they should be spending their money, and why.
By comparing industries, companies can identify broader trends of categories related to their business. Learning about how your suppliers compare with others in the industry gives you a better understanding and control of risk. Putting these insights to use will enable you to make improvements or changes where necessary, such as spending less with one supplier while increasing your purchases with another.
Analyzing business behavior such as purchasing will give predictive intelligence on the overall financial health of a particular supplier. If a supplier is making significant changes in their purchasing behavior, they may be considering a merger or acquisition deal. This could in turn drive a spike in prices for customers, making it harder to purchase large amounts of product on trade credit. Businesses may then want to re-evaluate their relationship with that supplier and explore other options, before putting themselves at risk.
With the potential for major mergers and acquisitions to continue throughout 2018, businesses need to be prepared. For more information on this topic, get in touch with a Cortera team member today.