In recent years, the pace of mergers and acquisitions has accelerated at a record-breaking clip. Companies closed $2.5 trillion worth of M&A deals in the first half of 2018 alone, and that momentum seems to be carrying into 2019.
Upon the closure of an M&A deal, nearly all companies are faced with an urgent imperative to function as a single, efficient business entity as quickly as possible.
To achieve a single view of the new organization and to establish cohesive business processes, companies carrying out mergers and acquisitions must integrate data to connect essential business applications and facilitate the sharing of information across the newly formed organization.
Transitioning from separate companies to an integrated business entity is no easy task. For help with this important requirement, leading companies often turn to global system integrators such as Deloitte. As managing director of Deloitte Consulting LLP, Rick Aviles has helped dozens of Fortune 1000 companies carry out successful integrations.
In this Q&A, Aviles provides insights drawn from more than a decade of experience guiding M&A technology projects. He explains some of the challenges and trends, and talks about how modern integration is transforming the way businesses merge two companies into one.
What do you see as the biggest challenges when two companies merge?
Rick Aviles: Speed is critical. Integration never happens fast enough.
Companies are looking to absorb an organization into their current portfolio as quickly as possible. Along the way, they are looking for opportunities to update, modernize and transform existing IT systems.
Typically, one company is buying another, because it needs a technology or product set to fill out a portfolio. Sometimes the deal is driven by cross-selling, product development opportunities or the expansion of geographical markets. Other times, the push to integrate comes from the seller and typically involves removing a business unit that is no longer a focus.
In the latter scenario, when the deal closes, and the company has sold the business unit, it needs to effectively transition. It wants the buyer to move quickly and absorb the business, so it can turn off services and turn its full attention to the refocused organization.
In all these cases, how quickly you can integrate is top of mind for leadership. Every day counts in the transitional phase of a merger.
It’s important to recognize that, although integration requires technology, it’s actually a business imperative. This activity is all about helping the business. Everything we’ve discussed — cross-selling, reducing support burdens — is entirely business-driven. It’s about the organization’s intentional use of technology to achieve critical business improvements.
For more information on how Deloitte and Boomi work together, watch our on-demand webinar, “Uniting Diverse Ecosystems During M&A: How to Achieve Rapid Integration without Operational Disruption.”
How else can business requirements affect M&A integration?
Rick Aviles: The business typically requires immediate visibility to reporting, so that it can make informed decisions about forward activities and comply with statutory reporting requirements.
In the past five or six years, I would say the toolset to do this has vastly increased. There are newer technologies available now that can help you turn that vision into reality faster. Some of those tools may be temporary. You’ll use them just until you can get something more robust, but they can help provide the visibility that is so critical on Day One.
What other IT challenges do companies face when an M&A deal closes?
Rick Aviles: Master data is always a challenge. In our client engagements, you’ll find us spending a lot of time understanding the data. When we’re pulling data from multiple systems, there’s an entire level of normalization and translation that must occur.
So, we’re all saying a widget’s a widget and a customer is a customer. We’re all speaking one language. A lot of it is getting everyone to decide how they want to see their business.
My advice to companies integrating after an M&A deal is to begin with a common understanding of the data. Then, ask “what do I want all of the business applications to do?” After that we can begin the work of application rationalization and assess business applications to determine what should be kept, replaced, retired or consolidated.
When we get these conversations going, companies often say, “We’re going to live in a world of multiple systems, but we’ve got to get to the golden record. How do we get there?”
We agree on the data that is needed and use tools like Boomi to do the extraction and the translation of the data so we can finally see it as a cohesive set of information.
How do data integration and data management fit in with digital transformation?
Rick Aviles: Many organizations are concerned about being disrupted by new technology that could put a strain on the current way they deliver services or SG&A (Sales, General, and Administrative expenses).
To get ahead of disruption, companies are undertaking digital transformation and trying to find ways to leverage the cloud to drive those initiatives, rethinking the way they fundamentally deliver IT services today.
Many companies turn to the cloud to help them reduce costs while also giving them the agility they need to fight off new, quick-moving competition. They need to jettison their technical debt, so they can focus on serving the business.
How are cloud technologies changing how companies manage merger projects?
Rick Aviles: Cloud can play a critical role in how companies manage mergers and acquisitions. Companies are often looking for a quick and flexible integration path across all applications from on-premise, public cloud and the edge. A company may go from a single-tenant to multi-tenant clouds and need to quickly connect and govern across all.
For many organizations, figuring out how to connect and govern multiple clouds and applications in a condensed timeline can cause discomfort. A hybrid cloud strategy can help to quickly bridge cloud and on-premise applications by providing the agility of the cloud with the security of on-premise.
How does the role of integration change with a cloud-first approach?
Rick Aviles: If you go to the cloud, you need something that’s going to be the glue to connect all these cloud apps together.
You need an integration platform that’s going to be able to talk cloud-to-cloud and cloud-to-on-premise. It needs to handle high-volume traffic, handle translations and address the nuances. You need something that’s straightforward to configure with minimal customization to perform all the work.
On large and diverse teams, there could be multiple people with varying skill sets, but they can all learn how to use visualization tools, because it doesn’t require anyone to be a senior developer. By enabling a broader pool of people to participate, an integration platform can increase a company’s agility.
At the same time, companies can become concerned about governance. They want to know that a governance model is in place across all groups. Fortunately, an integration platform like Boomi can address governance, too. When the work is spread out this way, the whole project becomes faster and easier.
So what does a modern, agile M&A integration approach look like?
Rick Aviles: At deal close, Deloitte can assist a company with quickly spinning up some new cloud applications to get the data and visualization needed. And with the right kind of integration platform as a service (iPaaS), all of its cloud and on-premise applications can be connected relatively quickly. Boomi can serve as a means to manage disparate systems and create a consolidated view of the business.
Some of these applications may not be in their desired end-state at deal close, but they can be quickly configured and moved to their desired, more heavyweight application in a year or two, when it’s more important for the company to be able to scale.
Whether an application is a temporary or long-term solution, the objectives are typically the same; connect quickly, integrate, and manage the data. That singular view of the company helps ensure the company hits the ground running at deal close.
Deloitte + Dell Boomi
When a solution calls for demonstrated technology that connects cloud ecosystems, data and on-premise applications, Deloitte turns to Boomi. Together, Deloitte and Boomi aim to solve integration issues and deliver improved organization-wide connectivity across applications, systems and platforms.