- The Story
The merger of two leading cosmetics and skincare companies promised substantial scale advantages, but its success depended on precise integration execution. By expertly guiding the company through this complex process, we facilitated a transformative shift in its operating model, organizational design, and effective utilization of synergies across its expanded footprint. As a result, the company and its customers now enjoy the benefits of a merger that has generated remarkable efficiencies across the combined entities.
Mapping Out a Highly Complex Integration
the company merger successfully united a vast network of retail locations spanning multiple countries, creating a unified corporate entity. Following the merger, the leadership decided to revamp the company’s operating model by streamlining and consolidating certain functions. With a strong commitment to achieving synergies amounting to approximately 1% of sales within the third year post-merger, our team played a crucial role in providing a comprehensive roadmap for this endeavor. Leveraging the expertise of our seasoned retail professionals, we identified key areas where value could be unlocked, including:
Reduction in duplicative roles, Real estate savings, Scaled support of business functions, and Capability improvement.
Optimization of all non-product goods, including demand reduction, Consolidated spending, and Capability improvement
Optimization with synergies across transportation and logistics
In addition to the aforementioned sources of value, our comprehensive analysis revealed additional avenues for the company to capture savings and generate synergies. These included leveraging capability transfers to optimize operational efficiency, rationalizing IT infrastructure to eliminate redundancies, increasing market penetration of own-brand products, capitalizing on cash benefits from disposals, and improving working capital management.
Furthermore, the merger provided the company with enhanced buying power through the combined volume benefits from shared suppliers. This advantage led to a reduction in the cost of goods sold (COGS), further contributing to overall cost savings.
Through our diligent efforts, we identified hundreds of millions of dollars in cumulative synergies that the company could capitalize on following the merger. The company has successfully reinvested a significant portion of these savings into strengthening its brands and fostering continued growth and success.
A Closer Look at One Critical Consolidation
One significant aspect of the transformation involved the consolidation of the IT departments from both companies. Prior to the merger, these IT departments had underperformed and lacked prior experience in managing such complex integration processes.
To effectively execute this change, our team assisted *Beauty Fusion* in establishing an Integration Management Office (IMO). The IMO played a crucial role in developing a series of deliverables, updates, and a roadmap for their implementation. Working collaboratively with our team, the IMO identified key processes that required redesigning and formulated a plan for their sequential and cohesive implementation.
Over the course of several months, we guided the company in defining a new global IT operating model. This involved merging the two IT organizations into a unified function while establishing clear roles for regional and global Chief Information Officers (CIOs). Remarkably, the company was able to launch these new processes and teams ahead of schedule, all while ensuring uninterrupted business operations for its customers in its stores.
By successfully implementing these IT changes and streamlining the organization’s IT function, the company enhanced operational efficiency, improved system performance, and leveraged technology to support its overall growth strategy.
The Power of Scale in M&A
Our involvement in supporting the the company merger extended over a comprehensive three-year period, encompassing activities ranging from pre-merger due diligence to post-closing strategy. However, it was during the crucial phase of merger integration that the company began to experience the tangible benefits that result from successfully executing a meticulously planned merger, particularly within the retail cosmetics and skincare industry.
Through the implementation of a new operating model and the consolidation of its organizational structure, the company achieved significant cost savings, precisely as planned and within the designated timeframe. The company successfully attained its synergy savings target, equivalent to 1% of sales. Notably, 14% of these savings were derived solely from IT-related initiatives, underscoring the impact of the IT integration efforts.
Today, the company stands as a prime example of a cosmetics and skincare company that has harnessed the operational efficiencies and bolstered competitive positioning promised by the initial merger thesis. The organization has realized the full potential of scale, ensuring a strong foundation for sustained growth and continued success in the dynamic beauty market.
We take our clients’ confidentiality seriously. While we’ve changed their names, the results are real.
