By Eric M. Gauthier
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PDF Help Mergers and acquisitions are never easy. All too often
M&A's fail to integrate quickly, fail at operations and fail to achieve
stated synergies. The stark reality is that while CEOs are under intense
scrutiny to create shareholder value at all times, effective M&A execution
can be the difference between creating and destroying value.
But what if one of the companies involved in an M&A is
in the midst of an enterprise solutions implementation, or has just completed
one? Today either situation is often the case. In the 1990s companies spent
hundreds of millions on enterprise solutions implementations. What happens to
these implementations after a merger or acquisition is complete has significant
strategic and financial implications.
The magnitude of executing a post-M&A integration in an
enterprise solutions environment is often wildly underestimated. This is
because enterprise solutions integration is often considered an IT integration
project rather than an effort that will have an impact on company-wide
operations and on the ability to execute strategic change.
Realizing Enterprise Solutions Planning Benefits
Post M&A Different business drivers, priorities and expectations
characterize an enterprise solutions implementation and an M&A integration.
The desire to complete M&A transactions quickly with little or no business
disruption is preeminent. Enterprise solutions initiatives, on the other hand,
are traditionally regarded as slow, costly undertakings that, ironically,
sometimes outlive the tenure of the CEOs who spearheaded them.
But what should a company do if it is trying to accomplish
potentially conflicting goals of a speedy M&A and a complex, lengthy
enterprise solutions program at the same time? What are the keys to successful
post-M&A integration when enterprise solutions integration must also take
place? Accenture has identified three critical components in this
environment.
- Manage expectations for enterprise solutions return
on investment. Maintaining the level of business process integration
that justified an enterprise solutions project in the first place may be
critical to maintaining value after a merger or acquisition. Doing so will
likely require additional investment, which will have an impact on the
previously expected return on investment. Expectations for positive returns in any particular situation will depend on:
- The existing level of integration before the
M&A,
- The level of integration required between the two merging
companies, which often will depend on the nature of the M&A deal, and
- The enterprise solutions integration approach and model,
such as moving to a new enterprise solutions architecture or keeping one of the
existing enterprise solutions models. All in all, this means many companies
must accept the need to invest more in enterprise solutions while deferring
expectations for a positive return on investment.
- Strategically time the enterprise solutions
integration. Organizations, in general, are looking to leverage
their core enterprise solutions by extending their enterprises' customer
relationship management, procurement, supply chain and portal capabilities.
Advanced functional modules to meet these needs are now available.
Less-monolithic, component-based, plug-in and web-enabled architectures are
emerging as well, and they will keep evolving over the next several years. In
addition, other enterprise solutions delivery options, such as the application
service provider business model, may offer potential benefits.
Merging companies will need to consider several key factors when planning and
timing their post M&A enterprise solutions integration effort, including:
- Whether to integrate current software or to wait for the
next generation,
- Choosing between a short-term tactical integration
approach versus long-term strategic on, and
- Evaluating the impact if more than one merger or
acquisition is planned.
- Choose the appropriate enterprise solutions
architecture model and migration path. Key to Accenture's approach
is “smart speed.” M&A's require speed and flexibility; the enterprise
solutions component must respond to this need for speed. This requires a large,
complex, multidivision, multiregion enterprise solutions integration, which may
take years to complete.
Smart speed includes:
- Early planning, particularly in the formulation stages of
the M&A transaction to force participating companies to understand the flow
of information and business processes, which will need to be linked as well as
confront integration issues up front.
- Involving the IT organization(s) up front, not as an
afterthought.
- Dedicating post-M&A integration teams, not
“spare-time job” resources.
- Minimizing the business-disruption window by identifying innovative deployment strategies.
- Creating a governance model, including executive sponsorship and a global decision-making process.
Future business benefits will depend on the recommended
enterprise solutions architecture and its ability to enable the company
business strategy and business synergies expected from the merger or
acquisition. In developing an approach, understanding the business drivers,
such as acquiring new products or services or opening new geographical markets
or gaining a new customer base, is key to ensuring that the integration effort
is aligned with strategic intent.
Once the business drivers and corresponding value proposition have been identified, three major steps must take place.
- Define the enterprise solutions system
strategy, with options ranging from distributed independent systems
to a single, fully centralized system.
- Define the post-M&A enterprise solutions
migration strategy, with the following four major options: Retain
one model, retain both models, choose the “best of breed” components from each model or move to a new model.
- Define the deployment strategy,
including ensuring a productive first 100 days, keeping future M&As in
mind.
In most cases, it will be appropriate and necessary to
define both a short-term tactical approach, which will focus on mandatory
requirements such as financial integration, and a long-term strategic approach
from which the future enterprise solutions architecture will be built.
The nature of the M&A deal and the integration
objectives of the two companies will, for the most part, drive the post-M&A
enterprise solutions integrated thinking. Accenture has developed an
integration decision model that includes more than 20 criteria (see Figure 1)
to consider when going through such an evaluation.
Figure 1 
Enlarge this image
Although a minor integration effort may be limited to a
simple data migration project, a complex, global enterprise solutions
integration can be similar to an initial implementation. Such a daunting
project can intimidate even the most seasoned executive. The guidelines covered
in this article may not only help executives prevent the collision of competing
demands, but also help the new company reap the benefits of enterprise
solutions planning.
Eric M.Gauthier, partner—Corporate Strategy, is
based in Chicago and can be reached at
eric.m.gauthier@accenture.com.
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