A Grocery Giant Enjoys the Fruits of a Successful Merger Integration
A new operating model and organizational consolidation delivered the synergies that large retail mergers can provide.
The merger of two major grocery companies promised huge advantages of scale, but only if the resulting company expertly followed through on the tricky business of integration. We made sure that happened for GroceryCo*, helping the company transform its operating model, redesign the organization, and exploit synergies across its expanded footprint. Today GroceryCo and its customers are enjoying the rewards of a merger that brought about efficiencies across the combined companies.
GroceryCo’s merger united thousands of stores across multiple countries under one corporate umbrella. After the deal closed, leaders chose to shift GroceryCo’s operating model, consolidating some functions. With GroceryCo’s leadership committed to realizing synergies worth about 1% of sales by third year post merger, our team provided the road map. Our retail experts identified value through:
Along with these sources of value we found more through capability transfers, IT rationalization, own-brand penetration, cash benefits from disposals, and working capital. GroceryCo also could expect greater buying power through the volume benefits from shared and combined suppliers, reducing the cost of goods sold (COGS).
All told our team identified hundreds of millions of dollars for GroceryCo to save in cumulative synergies following the merger, much of which the company has been able to reinvest into its brands.
One major element of this was merging the two companies’ IT organizations, which had historically underperformed and whose leadership lacked prior merger experience.
To execute the change, we helped GroceryCo establish an Integration Management Office (IMO), which developed a series of deliverables and updates and a roadmap for implementing them. The IMO, working collaboratively with our team, identified the top priority processes to redesign, and made a plan for launching them in a sequenced, coherent manner.
Over several months, we helped GroceryCo define a new global IT operating model, combining the two IT organizations into a single function, complete with roles for regional vs. global CIOs. GroceryCo was able to launch these new processes and teams ahead of schedule while still operating business as usual for the customers at its stores.
Our support of the GroceryCo merger spanned three years, from pre-merger due diligence to post-closing strategy. But this final chapter, merger integration, was where GroceryCo began to reap the benefits that accrue to retail companies that achieve scale through a meticulously planned merger.
The company’s new operating model and unified organization has translated to significant savings—all delivered on time. GroceryCo reached its goal of synergy savings that reached 1% of sales; of those savings, 14% were from IT alone. Today the company enjoys all the operational efficiencies and bolstered competitive positioning that the initial merger thesis had promised.