Consider this. You want to acquire a division of a company that is up for sale. It fits perfectly with your business. The price is right, and all the negotiations have gone well.
But then the question arises: How do you keep the new division running while you integrate it into the wider business? The seller is offering a transition service agreement (TSA). But there are severe financial penalties if you don’t exit on time. Now what? Time to think about cloud computing.
You see, according to a recent article by Deloitte in the Wall Street Journal, cloud computing can turn a potential deal breaker into a deal maker.
In the article, Deloitte reckons that a cloud-based ERP solution can be operational in four to seven months for a midsize company and roughly double that for a large international.
It’s way faster than trying to implement an on-premises solution. And it’s less risky, because no hardware is needed, and there is minimal configuration. Consequently, you can significantly accelerate your exit from a TSA and minimize the chance of financial penalties.
But that isn’t to say that cloud computing is a universal panacea that will suit every situation. In the article, Deloitte cautions that choosing a cloud-based ERP solution requires the same due diligence as every other aspect of M&A. Every vendor has its own strengths and weaknesses, as well as different approaches to managing and enhancing its product.
However, here are six key things to think about:
- Buy to exit the TSA and add other functions later
- Think about using a two-tier ERP strategy, particularly if you do not plan to fully integrate the acquisition
- Keep it simple by adopting standard process flows where you can
- Thoroughly check out the different pricing structures vendors use
- Evaluate carefully whether third-party add-ons will be needed
- Decouple ERP from other infrastructure investments
Follow these nuggets of wisdom, and you could significantly smooth your path to a successful acquisition.
View the full Deloitte article: M&A Loves the Cloud. Read about one company’s experience: Indivior: Connecting The Business With A Digital Core To Run Live.