There’s a lot of risk involved in M&A transactions, with many opportunities for error along the way. One of the biggest risks, of course, is that the post-M&A entity doesn’t accomplish what the merger was designed to do. Instead, unsuccessful data migration and lack of harmonization may mean that you end up with additional technical debt. If the task of separating the data in a complex divested system wasn’t evaluated correctly, the carveout project is also likely to require additional effort, leading to dreaded TSA (transition service agreement) penalties. TSAs are a significant driver in M&A projects—the terms need to be emphasized prominently in the planning and scoping.
Setting clear M&A goals, creating alignment between the business and the IT implementation, and intertwining those processes can help you find clarity and success throughout, while avoiding costly pitfalls. Here’s what you need to know about data integration and how to start the M&A process.
Create a Clear Plan of Action
M&A projects are incredibly complex by nature, and executing data migration is often the most daunting aspect. In order to figure out what you’re going to do with your data, design a plan that takes you through the M&A process from start to finish, and visualize the ideal end goal. Keep the business case for the acquisition in mind as a guiding principle as you assess the technical challenges and opportunities of the deal.
To help guide you as you design the M&A process, consider questions about your company’s data needs. To start, do you need to integrate the company you just bought into your system? Or, if you sold off a business unit, do you need to separate data for the divested units from your current system? Does the company you’re acquiring have the same ERP system? If not, what ERP system is it using? What regulatory issues might come up that could delay, lengthen, or even halt the process? Think about how quickly the data migration needs to be completed, as well as your maximum budget for the project.
Answering these questions will help clarify your data needs and project goals so you can create a customized plan of action for your M&A. By creating a flexible strategy that takes into account the framework and business goals of your M&A, you’ll give the process the highest chance of success and maintain a competitive edge. Otherwise, you may end up wasting time and resources by completing initiatives that don’t fulfill your
end goals.
IT and Business Alignment
All of that strategizing could go to waste, however, without cooperation between your IT department and other departments, such as the office of the CFO and corporate development. Companies that align their business strategy and IT implementation see the most success from M&A transformations due to the greater understanding gained and the flexibility enabled.
To that end, the IT department should be involved in the transformation project from the starting line. Unfortunately, that only happens in the rarest of cases, and usually IT is only involved within the narrow scope of carrying out due diligence. But, that’s a big mistake. When you wait to involve IT until the ball is already rolling, it has less time to prepare for the project. And, importantly, IT may not necessarily have all the information it needs to plan the project road map in its entirety. This can lead to solutions that, while quick, aren’t properly thought through. Quick solutions also may lead to challenges that could have been avoided.
Of course, in order to be useful throughout the planning process, the IT department needs to understand business goals and be familiar with business processes. This deep level of insight into the business gives IT a superpower: the ability to implement necessary changes with more flexibility and less friction.
Flexibility is critical to any successful transformation project; there are bound to be unexpected challenges and twists in the road. But, having the flexibility to adapt to those changes and adjust IT processes or decisions can be the deciding factor between a well-executed M&A project and a project ridden with delays and additional costs, such as TSA penalties. That’s why alignment of business and IT—particularly, the early involvement of IT—is a major factor for the project’s success.
The Role of Automation
Data integration involves many labor-intensive, repetitive tasks, and each decision you make has a far-reaching impact across the preservation of history, master data relevance, security, and regulatory compliance. The tedious processes that plague most carveouts can be automated, ensuring fast, secure results, with the added benefit of automated audit trails.
Automation plays an important role in the M&A process, enabling IT to support even the most challenging business
carveout plans. It also helps speed up post-merger integration projects, providing a level of insight and control over the process that can’t be achieved with traditional approaches.
Executing With Minimal Business Disruption
Now that you have a plan in place that incorporates automation, think about what you need to go live. Can your business handle a disruption lasting longer than a weekend? Or do you need to execute as quickly as possible in order to avoid interrupting business operations? Can you afford to take 9 months to complete the data integration project? Or does it really need to be finalized even faster, say, within a 3- to 6-month window?
For example, Jones Lang LaSalle (JLL), a financial and professional services firm specializing in commercial real estate services and investment management, needed to integrate large sets of financial data from significant acquisitions. To add to the complexity, it also needed to convert the data onto its ERP system in a way that would ensure the accessibility and availability of historical and master data. The massive historical data conversion needed to be completed almost as soon as the acquisition was finalized, so JLL could provide uninterrupted service to new clients. By partnering with an automation-driven transformation company, JLL successfully completed the project in just 3 months without interrupting business operations. But regardless of the timeline, companies need a software-based, predictable process for M&A.
Here’s one way to think about it: If you put your house on the market, you’d want the selling and moving process to be as smooth as possible so you could get into your new home quickly and without any problems. That’s why it’s so important to close the gap between business decisions on the CEO/CFO side and IT execution on the CTO side when you start the M&A process