Experience has showed 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 necessary to achieve the expected synergies. Reducing risks during these IT transformations remains on top of the agenda of successful 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 private equity needs to overcome a list of IT-related challenges, among which:
- Perform the integration in a limited timeline even though key activities must be performed (identify business needs, implement the defined solutions and services, ensure transition from data migration to change management…)
- Manage obsolescence
- Achieve interoperability
- Reduce risks and enhance ROI
- Ensure business continuity at Day 1, especially when Private Equities do not have necessarily the operational capabilities in terms of information system management (e.g. compared with Corporates)
- 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?
As explained earlier, what is important to investors is to generate more business value. So most preferably, the IT should be simple to carve-out or combine. This is when cloud-based ERP solutions should be taken into consideration in M&A implementations. According to KPMG’s Cloud Survey Report, Cloud is not only a transformative solution that helps organizations engage strategic initiatives and achieve strategic goals. 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. This being said, 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. For example, they provide standardized and optimized Master Data Models. In such a digital era, it is definitely a growth enabler.