Procurement leverage across portfolio companies

Every operating partner has had the same thought. Twelve portfolio companies, each buying its own energy, freight, packaging, temporary labour, insurance and IT, each negotiating alone with suppliers who sell to all of them. Surely the combined volume is worth something.

It is definitely a sound logic but is not as straightforward as the pitch suggests. What follows are the questions deal teams and portfolio CFOs most often raise, and straight answers to each.

How much is there, realistically?

The published numbers vary widely, and many come from firms selling the service. Accenture's December 2024 research on procurement in private equity suggests that procurement programmes can cut direct and indirect spend by 8% to 12% within months, and that 84% of PE leaders aim to create operational value through procurement. The same research found 58% say generating that value is difficult. Efficio, writing in 2025, argued that third-party costs in Europe and North America had risen by 20% or more since the pandemic, and that strong procurement teams were targeting double-digit savings on that inflated base.

Treat ranges like these as an upper bound for a well-run programme, not a planning assumption. The honest answer for any single portfolio is that it depends on how fragmented the current buying is, how much spend is genuinely common across companies, and whether the savings are enforced once contracts are signed.

Which categories pool well?

Indirect categories with standard specifications pool best: energy, telecoms, fleet, insurance, office supplies, temporary labour, travel, software licences, waste management. Freight and parcel carriage can work well where companies ship similar profiles on similar lanes. These are categories where the suppliers mostly care about volume and payment reliability.

Direct materials pool less well. A food manufacturer and an engineering business share very few raw materials, and even two manufacturers in the same sector usually have different specifications, approved supplier lists and quality requirements. There are exceptions, packaging being the most common, but the case must be made category by category.

Should we use a group purchasing organisation or build our own?

Group purchasing organisations offer pre-negotiated contracts that portfolio companies can join quickly. They are fast and need little central effort. The drawbacks are that the contracts are generic and the savings depend on each company actually switching. Even vendors in this space acknowledge that a GPO cannot do much until the portfolio's spend data has been cleaned and consolidated.

Building a central procurement capability takes longer and costs more upfront. It gives you contracts shaped to your companies, better data and someone accountable for compliance. For a sponsor with more than a handful of companies, the sensible answer is usually a mix: GPO contracts for commodity indirects, a small central team for larger or more complex categories, and local buying for everything specific to each business.

What usually goes wrong?

Compliance. A portfolio contract is signed with great fanfare, and six months later half the companies are still buying from their old supplier because the site manager prefers them, the switching cost was never budgeted, or nobody told accounts payable. Efficio makes the point that negotiated savings erode through weak tracking and unclear accountability, and that savings should be measured in the P&L rather than at signature. That is the single most useful discipline in this whole area.

Data is the second problem. Portfolio companies use different ERPs, different supplier names for the same supplier and different category codes. Until spend is classified on a common basis, nobody can tell what is common, and the opportunity assessment is guesswork.

Across a group of portfolio companies, combining logistics spend gave the most reliable savings because volumes were easy to measure and carriers competed hard. Office supplies looked attractive on paper, but each company kept buying locally and compliance never got above half, so the savings never arrived.

Competition law is the third issue, and it should be checked rather than assumed away. Joint purchasing between companies that compete with each other, or that compete in the same selling markets, is covered by the Competition and Markets Authority's 2023 guidance on horizontal agreements (CMA184). Pooling indirect spend across unrelated businesses is usually low risk. Sharing pricing or volume data between portfolio companies that compete is a different matter. Take advice before setting up any shared buying where two or more companies sell into the same market, and keep commercially sensitive information within a central team that does not pass it between them.

Where should an operating partner start?

With a four to six week spend cube across the portfolio: twelve months of purchase ledger data, cleaned and classified to a common taxonomy. It will show which categories are genuinely common, which suppliers already sell to several companies, and roughly how fragmented the buying is. From there, pick two or three categories with clear volume overlap and an approaching renewal. Run those well, track the savings to the P&L, and use the result to earn permission for the next wave. Efficio's 2026 outlook makes a fair point about timing: procurement diligence is starting earlier in the deal and continuing through the hold, rather than being treated as a first-year exercise.

What you are building is a habit, not a one-off saving. Holds are long enough now that a procurement capability which keeps working through year five is worth considerably more than a sharp round of negotiation in year one.

BankStreet Partners provides managed procurement for portfolio companies, and the free Procurement Savings Sizer gives a quick first view of where pooled spend could pay off.