Most of the clients we work with grow at least to some degree via mergers and acquisitions of other companies. Either they want to branch into new markets, acquire new customers, and/or leverage operational competencies of other companies. Regardless of the drivers of these M&A activities, there are a number of operational and strategic risks and pain points that unfortunately often aren’t adequately addressed by organizations.
For example, the following are several challenges when a company merges with or acquires another company:
- Different business processes and workflows
- Different products
- Different customers, with different ways of servicing those customers
- Different ERP systems
- Silo mentality among employees
While companies are often aware of these challenges before they engage in their M&A due diligence, they typically fall short on execution in addressing them. We typically are hired several years after a merger or acquisition, and often times after several M&A transactions, when the pain becomes too obvious and disruptive to the business.
Although these challenges will always exist in a merger or acquisition to some extent, they don’t necessarily need to be as painful as most organizations let them become. After several years of operational misalignment, the differences between these merged companies become glaring as executives begin to see the costs associated with multiple ERP systems, different ways of doing the same processes, and lack of a shared services vision to help minimize redundancies and increase scale in the organization. After all, most of these expected benefits were likely identified as financial justification for the transaction, so it is appropriate that executives will eventually focus on addressing these items.
One potential solution to proactively address these misalignments before they become too disruptive is to define an ERP business blueprint for the overall organization. If a parent company has clearly defined processes, job roles, key performance indicators, system configurations, and other operational and enterprise software clarity, rolling M&A companies into the parent organization will be significantly smoother. In addition, the parent company’s blueprint will help define the direction the new organizations should go in regard to potential new ERP systems or upgrades, rather than necessarily keeping their legacy systems intact.
Below are just a handful of operational, organizational, and technical issues that should be defined in an ERP business blueprint:
- Standard business processes and workflows
- Organizational roles and responsibilities within the new ERP business processes
- Key performance indicators for each process
- Systems and tools to be used to complete each step in the process
Once these items have been defined for the overall company, M&A integration becomes much more efficient and results in higher business benefits. In the shorter term, it helps companies with multiple business units gain efficiencies through standardization.
Learn more about our ERP consulting services (including ERP business blueprint development) and find out how we can help your organization through this your implementation process.