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M&A Data Integration Drives Successful Transactions
If you're not creating new value with a merger or acquisition, there's an excellent chance you took a wrong turn somewhere along M&A Blvd. Maybe your due diligence wasn't quite up to snuff, or maybe you didn't invest enough time and effort into the integration itself. Either way, it's not great.
The latter of those two scenarios – the dreaded post-merger integration (PMI) failure – slips under far too many corporate radars. And since this is such an information-driven world, inadequate or missing data integration processes and solutions are often Public Enemy No. 1 on the M&A failure front.
However, just a few best practices can quickly turn that integration frown upside-down, paving smooth, free-flowing binary roads across a new business to maximize synergies and value along the way.
Start with a Mergers and Acquisitions Framework
M&A transactions don't occur in a vacuum. You're combining multiple entities, each with its own people, customers, data, information systems, and processes. Therefore, a successful combination – maximum synergies across the new organization – depends on getting everyone and everything involved to place nice with one another. And that doesn't happen on its own.
For example, one of the items highest on a typical post-merger to-do list is consolidated reporting since, without it, decision-makers are largely flying blind. However, what happens when the entities you're combining use different reporting systems and have data repositories scattered to the winds? Well, as we detailed in Embark's Post-Merger Integration Checklist & Best Practices, unless you've answered the following questions during the due diligence process, you have a problem on your hands:
- What components and systems are involved in the combination?
- Who and what is involved in combining those components, systems, and workstreams?
- What intermediate steps are needed to run the two companies and roll them into one business model?
- What and when is the convergence for the entities?
You see, without hefty doses of foresight and effective change management, something as critical as consolidated reporting could very well slip through the cracks. And while we urge you to take a closer look at our PMI Checklist and Best Practices for a more in-depth look at fitting the many pieces of an M&A deal together, the back-of-the-napkin summary is to create a PMI framework of four essential action items:
- Establishing communication channels across teams
- Creating and appointing particular people to a steering committee, integration teams, and a project management office
- Engaging with experienced third parties to assist and guide the integration
- Defining the desired end state, assigning PMI targets, goals, and relevant metrics
Answering such essential questions and building a solid framework before any merger or acquisition is paramount to success. Without these actions, creating a fast, reliable system for consolidated reporting suddenly becomes infinitely more difficult. And the same goes for identifying and generating operational KPIs, staying on top of debt covenants, cash flow, and countless other facets of business operations.
Put another way, who is going to do what tasks? And how will they perform these tasks? Obviously, M&A activity often involves too many moving parts to count. Thus, if you don't have a game plan for your post-merger life, you're going to feel like you're either lost in the woods or herding a thousand cats, many of the digital variety.
In that light, it's no wonder that, according to a ubiquitous study from HBR, 70% to 90% of M&A activity ends in failure, usually because it never creates the efficiencies needed to foster synergies and economies of scale. Therefore, if you want the whole to be greater than the sum of its parts, you better get really good at corralling felines – and quickly. Fortunately, that's exactly what a sound data integration strategy allows you to do.
M&A Data Integration: Your Key to Value-Driving Efficiencies
Business information is coming out of your ears. Your stakeholders and decision-makers are giving you the stink eye because your PMI data and information systems are about as kempt as a fraternity house after rush week. How will you organize and transform such a jumbled mess of disparate data and disconnected systems into something coherent, concise, and insightful?
Thankfully, you have a few choices regarding M&A data integration plans. But, as is usually the case, choosing the right one for your specific needs and goals depends on a truckload of variables, including available resources, timelines, and complexity, to name just a few.
There's something to be said for a DIY approach to the data integration process. It keeps you self-sufficient and, assuming all goes smoothly, can provide some cost savings. That is, at least from an implementation perspective, not an operational one.
Further, organizations aren't lacking for potential solutions to merge and manage data pipelines running through different people, departments, and offices, even if they're spread out across continents. However, the operative term here is if all goes smoothly. Because, like it or not, plenty can go sideways with such an approach. First, you have to have sufficient in-house expertise to identify the right tools, implement them, and then actually integrate the tools into the combined organization’s processes. No easy feat.
Likewise, you run the risk of losing key people and, in the process, critical insights into your data systems. You know that talented data engineer on your team? The one that spent an entire year manually creating a myriad of connectors to join all of the different data sources involved in your merger with Company ABC? Well, she's moving on to greener pastures, leaving a gaping void of knowledge and skills for you to fill. Once again, no easy feat.
Needless to say, there are some weighty pros and cons with a self-directed, in-house-driven approach to PMI data connectivity and integration. As a result, this strategy is usually better for smaller, simpler PMI projects that don't require a massive amount of manual, long-term heavy lifting. Of course, that assumes you already have data experts on board, a luxury many small or mid-sized companies lack.
There's absolutely no question that, as time goes on, businesses will increasingly rely on automated solutions to bridge data chasms. This is especially true for mergers and acquisitions, where automation technology is becoming essential for taking mountains of disconnected information, making sense of it, and transforming it into insights for leadership. And all without the expenses and headaches that come with a more manual approach.
Do you need to merge customer data between an SaaS-based platform and a transactional, on-prem database for your management reporting? That's not a problem when you pair the right automated solution with the right set of tasks. Once again, assuming you identify and implement the best automation tools for your needs, the result is scalable, transparent, and reliable. Even better, it provides real-time business intelligence your leaders can dig into from an app or web-based data dashboard on their phones.
This third and final choice in M&A data integration solutions becomes more critical and relevant by the day. Yes, automation tools are an absolute marvel for quickly and effectively joining data sets from business segments that were entirely separate entities not so long ago. But which ones are best for you? Are they difficult to implement and maintain?
That's why so many organizations turn to outside specialists for this critical need. By relying on an experienced third party, you don't have to worry about choosing the wrong tools. Nor do you have to have blind faith in your in-house people to implement them properly. Instead, the right team of specialists will get to know even the most complex and confusing data environments, your integration needs, and establish a roadmap to get you to that ideal future state.
Now, since nothing is perfect in this world, your implementation costs with a third party could very well be higher than a DIY approach. Therefore, your decision tree should include budgetary restraints, in-house capabilities, and the complexities involved.
Just remember, PMI data integration isn't just about hitting the ground running, though. It's also about long-term strategizing, choosing and implementing the best data management tools and finance transformation initiatives for the combined entity – ERP, CRM, RPA, and plenty of other acronyms. These are all insights particular outside specialists might be uniquely capable of providing.
Whatever route you choose, however, don't forget what we said up top – the intricacies of post-merger integration and seamless data migration too often slip between the cushions of the M&A couch. And our team of experts at Embark is here to prevent that from happening.