Mergers and Acquisitions: What Businesses Need to Know About Data Migration
With $3.8 trillion of mergers and acquisitions completed in 2018 alone, the industry is booming with companies like Raytheon and United Technologies merging this year. Completing a merger or acquisition isn’t just a business decision, and a business process. It’s also a massive undertaking on the IT side, as you figure out how to migrate and integrate business applications and business data.
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 project is also likely to require additional effort, leading to dreaded TSA (Transition Service Agreement) penalties. TSA is a significant driver in M&A projects – its terms need to be emphasized prominently in the planning and scoping.
Setting clear M&A business and IT implementation goals, 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, or at least cumbersome, 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 out, do you need to integrate the company you just bought into your system, or do you need to carve out data? What does your existing SAP landscape look like? Does the company you’re acquiring have SAP? If not, what enterprise resource planning (ERP) system are they 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.
By creating a 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 the competitive edge. Otherwise, you may end up wasting resources by completing initiatives that don’t fulfill your end goals. Companies that align their business strategy and IT implementation see the most success from M&A transformations.
The role of automation
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.
Automation plays an important role in the M&A process, enabling IT to support even the most challenging business carve-out 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, incorporating 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?
Norske Skog, for example, one of the world’s largest manufacturers of publication paper with factories around the globe, needed to carve out their Brazilian factory from its centralized ERP SAP system. The project was highly complex, with just one weekend to go live and simultaneously switch the cost accounting currency from US dollars to Brazilian reals. By partnering with an automation-driven transformation company, Norske Skog successfully migrated their data from the centralized system to the new structure, going live on a single weekend without interrupting business operations.
When the timeline is tight and the risks are high, it pays off to partner with the right software company for your migration and data needs. Regardless of the timeline, companies need a software-based, predictable process for M&A.
Here’s one way to think about it: If you were selling your house, you’d want the selling and moving process to be as smooth as possible so you can move into your new house quickly, without any hiccups. 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.