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Developing an M&A Migration Framework to Enable Quick Wins

By   /  December 27, 2017  /  No Comments

Click to learn more about author Hamaad Chippa.

There are many factors that play into a business’ decision to purchase another company. Most are looking for a way to grow top line revenue, and acquiring a competitor can help to push growth across new markets. Others are looking to improve profitability by taking advantage of economies of scale to reduce cost of operations, sales and overhead.

As technology continues to disrupt various industries, companies are looking for opportunities that are transformational to their business in order to stay competitive and relevant (i.e., Walmart buying Jet.com). Many M&A activities come with press, fanfare and hope that the new entity will provide better products and services for customers and, of course, greater returns for shareholders.

To be truly successful in the integration process, market trends, strategy, operations, technology, culture and talent need to be considered independently. The harsh reality is that only half of all mergers see operational, financial or strategic gains after the first three years as a combined company.

Data tends to be a forgotten element in the integration process. This is somewhat surprising because in today’s business interactions organizations are typically looking to leverage as much data as possible to unleash insights across their business and make informed decisions based on those insights.

Aggregated, trusted and shared data can help merging organizations develop sales strategies across customers (cross-sell or up-sell), identify marketing opportunities in new territories, and prioritize cost-cutting initiatives that are feasible, delivering the greatest impact.

The path to intelligently managing data starts with:

  • Creating a governance plan, which adds a layer of visibility and accountability to the Data Management process
  • Determining the value aggregated data can offer
  • Identifying the important data elements and attributes
  • Standardizing and cleansing data attributes so the organization is speaking the same language
  • Defining criteria for where data is stored and how it’s accessed

Another key part of the M&A integration roadmap is understanding what types of data is being, and has historically been, collected by each entity. Data collection strategies will inevitably differ, but collecting the right data early on will only help to achieve better M&A benefits.

In some cases, allowing acquired companies to run independently does make sense. If this is the case, important transactional, financial, and customer data should still be consolidated and leveraged across entities to help draw observations and insights that were not previously available, such as identifying the same customers to cross-sell to or reducing supplier costs through improved negotiation efforts.

For example, when helping a window manufacturer identify ways to reduce costs by leveraging product and supplier information, we found that past M&A activity resulted in 11 active ERP systems. When the organization wanted to make decisions across businesses, this setup made it difficult to manage, integrate, and consolidate product and supplier information for analytics and decision making. Had the organization enacted a data management strategy across the board from the beginning, the businesses could have continued to operate as individual companies, but with better transparency.

M&A outlook for 2018 looks to be strong. Organizations will be looking for deals that are transformational, meaning that positive outcomes are needed more quickly to stave off nimbler and tech savvy competitors. It should be considered a top priority to understand, migrate, standardize, cleanse, and consolidate data, in order to ensure strategic and synergistic opportunities are realized in the M&A integration process.

 

About the author

Hamaad Chippa is part of Informatica's Industry Consulting practice, responsible for identifying data management challenges, trends, and best practices in the manufacturing and retail, and CPG verticals. He also helps organizations understand the value improved data can have to important revenue, cost, and efficiency drivers. Prior to Informatica, Hamaad spent 10 years as a management consultant, specializing in providing leading-edge insights to help clients transform their businesses and attain high performance capabilities. He employed various methodologies to help clients with complexity / cost reduction, product development strategy, and manufacturing operations strategy, improving operational efficiency and effectiveness. Hamaad graduated from the University of Illinois at Urbana-Champaign with a bachelor degree in math & computer science and has an MBA from the University of Chicago, Booth School of Business. He's based out of Washington, D.C. by way of the Windy City. In his free time, he enjoys biking around the historic D.C. neighborhoods & trails, sports photography, and spending time with his family, particularly teaching his son about the Star Wars universe.

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