How To Maximize The Value Of M&A Activities

Abdullah Dagasan and Sharoukh Sequeira

Part of the “Digital Finance Transformation” series that provides a framework for CFOs to move forward confidently on the journey toward digital transformation

In today’s digital economy and business environment, M&A activities are constantly increasing throughout all industries and sectors. On the one hand, cheap money fuels M&A activities; on the other hand, established companies are seeking growth potential.

Our experience shows that M&A activities go hand-in-hand with transformations and major IT investments. Nowadays, M&A activities can be leveraged to modernize IT architecture.

“ … this is a once in a lifetime opportunity …”
– Alan Feeley, CIO, Siemens Gamesa

Clustering of M&A activities

Usually, M&A activities are quite complex and involve different points of view. Based on the size of the acquired company and the difference in capabilities, the primary intention differs.

However, a modern IT architecture can play a major role in each of the clusters, and it is a key driving force focusing on, for example, cost optimization, sales increases, or strategic steering.

Value added by a modern IT architecture

System landscapes are often grown over decades and struggle to keep pace with increasing digitalization requirements, like smartphone operability or voice control. Therefore, M&A activities are leveraged to redefine system architecture from scratch based on the most advanced technology according to the latest architectural guiding principles, like postmodern ERP.

For example, utility companies often have similar requirements but implement business processes differently. Merged together, cost structures can be massively reduced and released manpower can be leveraged to further increase digitalization and work on higher-value tasks. Furthermore, a modernized IT architecture supports features like condition-based maintenance, image-based anomaly detection, Big Data analysis, voice interaction, robotic process automation, and finally, future-oriented business-model development.

If merged companies offer products with cross- and upsell potential, joint product offerings and product bundling can be established. At the same time, the combination and harmonization of credit limits, terms of payment, rebates, and discounts for each customer can be realized in a simplified way by leveraging a modern architecture.

If companies of significant size merge, it will be necessary to adapt the steering model to ensure strategy-oriented leadership and accurate governance. For efficient implementation, it makes sense to leverage the latest technologies, such as user experience and cloud-based enhancement concepts. This, in turn, ensures the required flexibility as well as effective steering.

Methodology is crucial for success

Since there are a lot of methodologies in the market, it is crucial to choose the right one. Again, if two companies of significant size merge, each brings its own business processes to the party. Here, it is important to act strategically, focusing on long-term value. While there is not a “good” or “bad” process, often requirements are just managed differently in the merged companies.

Using standardized processes as guidance should be a cornerstone during design and implementation, since this approach reduces long-term maintenance costs and accelerates implementation. Furthermore, a proven methodology consists of solution validation and delta design. During solution validation, the standardized processes are evaluated in-depth, and gaps are identified and collected to the backlog. The delta design ensures that, for a prioritized backlog, sprint planning is developed based on the importance of the gaps. Usually, legal requirements are implemented with the highest priority, followed by the gaps providing the most business value.

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Abdullah Dagasan

About Abdullah Dagasan

Abdullah Dagasan is a chief business architect in the business unit CFO Advisory within SAP focusing on finance transformation. With more than 20 years of expertise, Abdullah has actively driven international customers’ post-merger integration and design of future system landscapes based on modern architecture principles.

Sharoukh Sequeira

About Sharoukh Sequeira

Sharoukh Sequeira is a business process consultant in the business unit CFO Advisory within SAP, with knowledge in the areas of controlling and project management. In recent years, Sharoukh has worked on various projects to support customers with their digital transformation.