This post originally appeared in Supply Chain Connect.
In today’s competitive business landscape, mergers and acquisitions have become essential strategies for companies seeking rapid growth and market dominance. And, as the global economic outlook improves, worldwide merger and acquisition (M&A) activity is predicted to pick up. In 2021, a record of $5.9 trillion in over 63,000 mergers and acquisitions was set, despite the specters of rising interest rates, inflation, political strife and supply chain uncertainty dogging dealmakers.
Despite the increasing numbers, failure rates for M&A initiatives are incredibly high – anywhere between 50-90%. Why? Not considering the synergies and redundancies of the end-to-end supply chain of both companies is arguably a top contributor to the shortfall.
So, how can you improve your chances for M&A success and reduce the inherent risk? Executing a successful capital expenditure plan during those transformative moments can make or break the deal.
CapEx planning empowers organizations to plan for sustainable growth, including mergers and acquisitions. But organizations must first evaluate the potential financial and service impacts and risks associated with CapEx, as these decisions regularly involve and affect larger investments. And because CapEx planning requires a significant investment of time before implementation, it typically affects the larger scope of the supply chain design.
Before implementing additional capabilities, companies should consider the following questions:
- What manufacturing enhancements could be made to existing facilities?
- Where will any additional inventory or increases in inventory be stored?
- How will various service levels be affected?
- How does this impact any recent mergers or acquisitions?
Companies in the midst of CapEx planning can enlist supply chain network design to help them model various scenarios. Design technology can help companies identify which CapEx investments could relieve roadblocks to productivity, for example, and increase capacity within their facilities. This approach can also help companies explore how supply chain decisions will ultimately impact their productivity and profits.