The chemical industry has traditionally utilized strategic mergers and acquisitions (M&A) to drive revenue growth, optimize geographical presence, enter new markets, and achieve cost synergies within existing product technologies. The success of M&A activities significantly influences a company’s ability to deliver shareholder ROI, making it a key value driver. In this article we’ll address how product master data management can accelerate M&A.
Challenges of M&A in the Chemical Industry
According to the latest US deals outlook, the chemical industry is anticipated to experience an upturn in the number and value of deals in 2024. Given the cost of capital, speed and success of integration will determine whether or not M&A activities are successful for companies pursuing this growth strategy.
Challenges specific to the chemical industry that can slow down integration include:
Siloed and inconsistently structured data sets
Gaps in product and technical data
Inconsistent product naming conventions
These challenges can be solved using a master data management solution, significantly speeding up and derisking integration processes.
Importance of Product Master Data Management
Successful operations integration in the chemical industry involves carefully considering not only basic HR and finance aspects but also the highly technical nature of products and the complexity of supply chains and distribution channels.
It’s crucial to manage product master data effectively to avoid integration failures stemming from duplicates, different naming conventions across geographies, and missing or disorganized documentation. Acquirers should be cautious about purchasing companies that lack organized systems, while companies aiming to be acquired can use well-managed systems as a selling point to enhance their attractiveness as a target.
Key Considerations for Integration During M&A
Every aspect of the business must be thoroughly examined to ensure a smooth and effective integration process. Well-managed product master data is crucial for this.
When planning a chemical business integration, consider how to:
Equip IT to integrate and migrate master data quickly
Empower commercial and marketing teams
Support environmental health and safety teams
Optimize operations with master data
Equip IT to Integrate and Migrate Master Data Quickly
Information technology (IT) plays a critical role in M&A success. It involves integrating data such as product data, enterprise resource planning (ERP), customer relationship management (CRM) and inventory management software, as well as migrating product data from various sources. The speed of these processes directly impacts deal closure. Success depends on a clear understanding of data locations, standardized data formats and product hierarchy. Siloed data or inconsistencies across regions or business units can complicate integration and migration.
Start by standardizing and harmonizing product data to simplify and speed up the integration process. Companies that are ready with clean data are more attractive to buyers, as integration will require fewer resources and lower costs to complete.
Using a programmatic approach for data transfer ensures that data accuracy is not compromised during the migration to new systems. This not only reduces the risk of data loss but also contributes to quicker uptime by simplifying the integration of new business systems, such as ERP, CRM, and websites.
Empower Commercial and Marketing Teams with Product Master Data
It is essential to ensure swift alignment of sales teams to fully capitalize on the anticipated benefits of integrating products within the same value chain. Sales teams for newly acquired product lines will often be combined with existing teams selling upstream or downstream technologies. Sales reps from both sides of the merger or acquisition need to understand the full portfolio to provide the best customer experience possible, fueling sales growth faster thanks to less friction during the sales onboarding process.
The inefficiencies caused by decentralized product data and scattered documents across various platforms hinder this onboarding process. Similarly, marketing teams should be able to seamlessly merge websites or develop new ones that convey a cohesive brand narrative and incorporate product data and related materials. Without a single source of truth for product data, these projects quickly become more expensive and time-consuming than planned.
Support Environmental Health and Safety Teams with Product Master Data
Integrating safety data sheet (SDS) libraries in the chemical industry requires a comprehensive, accurate, and up-to-date list of products and associated safety data. It’s important to carefully align SDSs with new company details during a merger or acquisition.
Additionally, regulatory teams in Environmental Health and Safety (EHS) must stay updated on hazardous inventory reporting and legislative changes related to chemicals and raw materials. Well-managed safety data can equip these teams with the necessary information to effectively manage compliance of their entire portfolio.
Optimize Operations with Product Master Data
The supply chain, procurement, and manufacturing teams need to optimize transportation, materials procurement, and fulfillment for a new network of suppliers, distributors, and customers. They must enhance shipping efficiency, consolidate raw material purchases, and innovate processes for new product lines using existing equipment.
Moving master data into a centralized environment can help identify gaps in product and technical data and documents earlier in the M&A process. Without a centralized data management system, there is a higher likelihood of overlooking contextual information that lives in data silos or paper records.
The solution starts with organized product data. Purpose-built by leading chemical and software engineers, taxonomists and data scientists, Knowde’s software digitizes, stores and maintains your master data, so your M&A strategy can deliver substantial ROI.
Case Study: Data Management Challenges after Growth by Acquisition
One $50M specialty chemicals distributor faced significant challenges managing its master data across product, customer and vendor data. They grew rapidly via acquisition, which prompted them to kick off an ERP data consolidation project.
Challenges they faced:
Harmonizing all data sets into a consistent format.
Inconsistencies in naming conventions, formats and the presence of duplicates.
Needed to syndicate clean, accurate data into their ERP and critical business systems.
Knowde’s solution:
A new, consistent global product hierarchy was established, and all documents were organized according to their related brands and products.
The ERP system is now fed with clean, consistent data, and the distributor can maximize the efficacy of their other software investments.
Faster and cheaper than they could have done themselves or with their existing agency.
Working with Knowde, the company saved a year’s worth of work, resulting in lower implementation costs and faster time to value. Now that their data is harmonized, they are also well-positioned to integrate additional acquisitions.
Conclusion
Master data management is essential for successful mergers and acquisitions in the chemical industry. Overcoming challenges such as siloed data sets, inconsistent product naming conventions, and technical data gaps can accelerate integration processes and reduce risks. Efficient master data management not only facilitates seamless operations integration but also enhances a company’s appeal as an acquisition target. By swiftly integrating and migrating master data, empowering commercial and marketing teams, and supporting environmental health and safety teams, companies can ensure their M&A activities add value to their business as a whole without creating organizational friction in the process.
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