When 2015 made history as the biggest M&A year on record, with global volume surpassing $5 trillion according to Dealogic, industry watchers began to make bold predictions about 2016 being just as strong, if not stronger. Bigger deals, a slowing IPO tech market, and the ripple effects of a market correction are expected to fuel this year’s M&A activity. But is this really a good thing when roughly half of all M&A deals fail to create shareholder value, according to findings from Boston Consulting Group.
While there are lots of factors that contribute to the success or failure of an M&A deal, post acquisition integration is one of the most critical. Specifically, the integration of financial systems and business processes. Done right, this is one area where a company can save significant M&A costs.
Having been involved in several M&A transactions throughout my career, I learned three valuable lessons about successful post M&A integration. First, don’t wait for the deal to close to get your infrastructure in place. Second, the right infrastructure will make your behind-the-scenes transition invisible to customers. Third, finance and IT need to be in lockstep throughout the entire process to accelerate the integration. Let’s delve into each of these points.
Don’t Wait for the Deal to Close
Oftentimes, an acquisition highlights the organization’s need for a more flexible financial reporting system overall. The deal puts a deadline on it. Yet hasty moves to quickly integrate financial and organizational data and business processes from both companies can cost more time and money in the long run than if the right infrastructure was already in place.
For this reason, it’s not a waste to get your house in order in anticipation of an acquisition, even when there isn’t one looming. What you have to keep in mind is that the right technology platform not only allows you to easily integrate a new company when the time comes, but also enables you to easily adapt to any changes in the organization as it continues to evolve and grow.
Make Your Merger Invisible To Your Customers
You’ll be hard pressed to find an executive that doesn’t ask about the anticipated growth in the customer base that will result from the merger. With even more eyes on the company after the deal closes, there should be a dedicated integration team in place. This, too, is an area that can be a huge cost saver. Businesses that underestimate the time it takes to fully integrate a company or assume employees can help while still doing their day job, put their customer relationships at risk.
Here are five non-negotiable criteria for your technology platform to support a post-acquisition integration.
- Ability to manage headcount planning and modeling as you add staff, anticipating the onboarding of employees.
- Global integration and uniformity in reporting financial results.
- Visibility into performance across the company and the ability to drill down to measure results by various attributes such as department and location.
- Complex currency conversion while ensuring accurate budgeting and forecasting.
- Multi-dimensional data modeling that easily scales.
EPM: Vital to Accelerating Post M&A Integration
For companies that have been through the M&A integration process, they know how important it is for finance and IT to be in sync. While every company has its own processes, here’s how we were able to accelerate our integration.
Our first step was to invest in an enterprise performance management (EPM) platform. With the ability to integrate and analyze data across the organization, establish benchmarks, and optimize business processes, EPM can accelerate M&A integrations. Going beyond ERP, an EPM platform quickly integrates systems, providing a bigger picture perspective on enterprise performance.
At HEAT, we selected Host Analytics for EPM and financial reporting and analysis to support the merging of two companies. The EPM deployment process took 90 days, with the lion’s share of the implementation taking place in the first 60 days. Since then, we’ve gained:
- Visibility into performance across the company with consistent analysis and financial reporting that also takes into account 10 different currencies.
- A sophisticated, multi-dimensional data model that easily scales, allowing us to move away from the restrictive columns-and-rows format of relational databases while ensuring accurate budgeting and forecasting.
- Ability to slice and dice key metrics accurately and drill down into details by location, department, or service.
- Support for complex headcount planning and modeling.
- The option to view data in an Excel-driven interface, which practically eliminates the learning curve typically associated with introducing a new platform.
- Insight at our fingertips. Less time is wasted sifting through data and more time is spent using the data to support the business.
The right enterprise performance management (EPM) platform not only allows you to quickly integrate a new company when the time comes, but also enables you to easily adapt to any changes in the organization as it continues to evolve and grow. For example, these changes might include global expansion, the introduction of new product lines, or the integration of data from legacy ERP applications as the business moves deeper into the cloud.
As the responsibilities associated with the CFO role continue to expand across the organization, EPM has become table stakes to ensure all areas of the business are running at top performance — and to quickly spot those areas that aren’t. With the ability to integrate and analyze data across the organization, establish benchmarks, and optimize business processes, EPM can accelerate M&A integrations.
Charlie Wickers is Director of Financial Planning and Analysis at HEAT Software. He is a seasoned corporate FP&A leader who excels in data analysis and synthesis for senior executive and board-level review. HEAT Software is a global organization that automates administrative services for IT, human resources, facilities management, and customer service while also tracking and guarding the networks that provide these services.