C&M Analyses | Actualite | Acquisition challenges

Resolving acquisition challenges

How to deal with challenges related to IT or cloud?

1) Summary

When preparing to make their next investment, all firms face the same set of challenges even though they may have different goals behind making acquisitions.

Private equity / VC may be looking to enable the growth of the company they are buying, increase or support major development projects. They could also simply have a buy-to-sell strategy. Experience shows the main challenges remain the same : how to pursue the entity they are buying through a transition of rapid performance improvement and how to manage talent in a way that best aligns with current and future business demands.

In addition to these acquisition questions, an acquerer face another set of challenges related to IT, especially if they are willing to set a stand-alone carve-in or create a build-up. In such a context, they may face two different scenarios: the acquired company may benefit from TSA from the seller, or on the contrary, the acquired company keeps the responsibility on the existing information system and must be autonomous. Information System is even more critical in these two cases and rebuilding it, to leave TSA or to have state-of-the art solutions, is a winning strategy.

2) How to address acquisition challenges related to IT?

Experience has indicated us that successful M&A deals go hand in hand with carefully planned and managed IT transition activities. Beyond IT integration, an IT transformation strategy is important to achieve the expected synergies. Reducing risks during these IT transformations remains on top of the agenda of acquirers.

However, when performing an acquisition, avoiding IT risks while also realizing potential value is challenging. In fact, the complexity is further compounded by the fact that acquerer needs to surmount a list of IT-related challenges, among which:

Perform the integration in a limited timeline even though key activities must be performed
Manage obsolescence
Achieve interoperability
Reduce risks and enhance ROI
Ensure business continuity at Day 1, especially when acquerers do not have necessarily the operational capabilities in terms of information system management
Perform business transformation while an IT transformation is ongoing
Adapt the corporate culture in order to secure collaboration between employees from both parties

In order to address IT transformation challenges and accelerate added-value capture post-closing, pre-configured Cloud solutions are a strong lever to focus on business value and align business functions.

So, how may pre-configured Cloud-based ERP solutions help solve common acquisition challenges?

What is important to investors is to generate more business value. So most preferably, the IT should be simple to create or combine. This is when cloud-based ERP solutions should be taken into consideration in M&A implementations.

Cloud is not only a transformative solution that helps organizations achieve strategic goals, but it can also be essential to the actual execution of transformation and a driver for value creation.

Cloud-based ERP solutions are technological enablers. Combining or carving out processes and systems could be very challenging, but Cloud-based ERP solutions had proven to be the key to an easier integration, a simpler collaboration and a faster completion. In addition to that, an ERP based on Cloud technologies contributes in value creation – or at least avoid value destruction – especially in a Build-up scenario where the private equity’s goal is to sell the firm. It reassures potential buyers that key challenges have been anticipated, specifically regarding the obsolescence. In fact, by using a cloud-based ERP, companies can prevent many problems that plague organizations relying on on-premises IT infrastructures face. Two main advantages are offered: efficiency and cost reduction. There is no more need to spend huge amounts of money on purchasing and maintaining equipments. It also guarantees flexibility which can make a significant difference to the overall efficiency of any organization.

Cloud is an opportunity for companies to reinvent and transform their business processes. So, Cloud is the answer to information system obsolescence and the solution for businesses to stay up-to-date regarding technology. Another challenge that could be faced is interoperability. These solutions comply with the latest protocols and ensure an easy communication / data transfer using API.

Beyond the technological aspects, Cloud-based ERP solutions are business accelerators. These solutions are well-known as strong assets for business process streamlining.

3) A pre-configuration cloud-based ERP solution is the key

In addition to avoiding the risks of obsolescence and improving interoperability, a pre-configured cloud-based solution addresses other challenges. It allows companies to :

- save implementation time : it guarantees the acceleration of complex IT transformations and the reduction of thier risks.

- save energy: the interest that comes with adopting a pre-configured solution is also to be able to help employees focus on core business tasks and on what is important.

These are two of the main factors leading to an enhanced ROI while performing an IT transformation.

It is important to note that firms should be considering a Greenfield approach in order to benefit the most from a pre-configured ERP solution. A Greenfield approach is essentially a reset button. It is a complete reengineering of business processes and workflows, while a brownfield approach is in a certain way the exact opposite. Users need to reevaluate and edit their existing processes, and in addition to that, brownfield implementation is best done on-premise.

So, the essence of a pre-configured solution is to define new ones. Its adoption is only relevant if a Greenfield method is to be considered. It is also important to bring attention to the size of the company. Experience has showed that middle-market firms are simply a better fit. In fact, small firms do not have the critical company size to adopt such frameworks. Large companies however have the ability and resources to engage a transformation where customization makes sense. Powered offers an accurate answer to middle-market firms that require to structure their tools in order to support their business leadership.

In order to successfully address these challenges, it's essential not to overlook the value of change management. Do not forget that the bigger the acquisition, the more processes, IT infrastructure, job roles and culture need to change.

To conclude, the way companies manage change is crucial to succeed aquisitions.

4) What C&M Analyses can do?

C&M Analyses brings a robust methodology and a proven solution called Improven Enterprise (IE) that helps acquerers secure their acquisitions and overcome the different challenges mentioned earlier. It is a pre-configured Cloud solution fully integrated that focuses on business value and aligns business functions. Powered Enterprise is not just about migrating finance or the supply chain into the cloud. It provides a combination of leading practices and processes as well as proven technology solutions with a next generation of delivery framework.

IE is an outcome-driven transformation solution that prepares businesses for the future. Investing in cloud solutions, target operating models, processes and tools gives acquerer that are willing to uplift business value instant access to leading practices and predictable outcomes. This solution contains:

The Improven operating model which is a proven solution set that is ready to work (industry insights, validation workshop packs, pre-configured ERP solution, test scripts and protocols, process taxonomy, defined data models and reports, governance and controls…). It shapes how transformation plays through every layer of the organization and helps to start the project as soon as possible

Regardless of the technology, the approach remains the same, to standardize and automate processes as much as possible by using 80% of the preconfigured solution and focus adaptation efforts on the remaining 20%. It is built on experience and insights.

Instead of lengthy process workshops to determine new process flows, Improven guarantees shorter process workshops with key decision makers to agree on pre-configured processes, focused on the 20% that are unique for the organization. As a result, the main focus will be on high value process areas.

To conclude, unlike traditional implementations, Improven accelerates transformation allowing companies to jump start their digital transformation by validating pre-built operating models instead of time consuming AS-IS analysis. Along with providing the governance, organizational and operational assets, a full transformation can be achieved with a shorter time to value.

The major benefits are as follows:

Two organizations successfully integrated with minimal disruption into a common technology platform designed to scale as the company makes future acquisitions
Business processes for finance, payroll and human resources standardized, simplified and streamlined on a single, cloud-enabled Powered platform
Enhanced management reporting put in place to support business strategy based on data that is now more timely, consistent, accurate and dependable.