Issue 1: Business Systems Strategy: following Merger or Acquisition

One of the first steps in ensuring a successful post-merger integration is to establish a business systems strategy for the combined business that supports the corporate vision and objectives. The goal should be to provide clarity in relation to business objectives and how the systems strategy supports those objectives.

There can be a number of realistic strategic options and establishing which one is best depends on a variety of factors, such as cost, timelines, future plans and where you’re starting from. Thorough analysis of each of the various options is then required to devise a coherent plan of action.

Some businesses’ default option is to roll in the corporate standard. There can be a lot of merit in that, but what if the new business is fundamentally different to the acquiring business? A system that works well for one business model or sector may be a recipe for disaster in another.

If retention of any of the existing applications is under consideration, then the formulation of an integrated systems strategy needs to start with the status quo. Are the existing systems adequate for the current and future functional needs of the newly combined organisation? Will they be appropriate for the scale (and potential future scale) of the newly combined organisation? Are they at or near their end of life and due to be upgraded or replaced?

Two-tier ERP (where a Tier 1 solution is used at group/corporate level and lower cost solutions are used to support local/regional or business unit specific requirements) may be appropriate in some scenarios. For example, local sales, purchasing, shop floor control and inventory management could be managed in the second tier, with financials, planning, consolidation and reporting taking place in the top tier. It’s important to recognise that there are cases where one size does not fit all, especially where there are locally unique functional requirements. In certain circumstances it may be wise to go with best of breed solutions to provide specific functionality in a business unit.

Another option worth considering is keeping legacy systems in both parts of the business while adding a reporting and consolidation layer on top of the existing systems. This solution is fine where there’s little interaction between the new and old entities – where in effect they act as independent business units – but it’s likely to be a very poor solution where a single integrated business is the objective.

This Lumenia Executive Briefing:

  • Classify Mergers and Acquisitions and identify when a new business systems strategy will be required.
  • Describe some of the steps required to develop a business systems strategy in this context.
  • Provide a detailed checklist of IT-related issues that may have to be addressed in the short to medium term.
  • Identify the IT challenges involved in realising some typical business benefits that might be expected following M&A activity.

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