Leveraging Microsoft Technologies to Enable M&A GrowthByChristophe DeslandesChief Information OfficerKapStone
About KapStone was started as a Special Purpose Acquisition Corporation (SPAC) for the purpose of building a domestic paper-and-packaging business through acquisitions. Stated goal to grow to $2B - $5B range within 2-5 years.
KapStone Today 2 Kraft paper mills+ 1 lumber mill Headquartered near Chicago Publicly traded on NYSE ± $800MM revenue 1,600 employees IT team: 30 full-time, 39 FTE
KapStoneTimeline Listed NASDAQ Listed NYSE Second Acquisition First Acquisition Founded As S.P.A.C. Third Acquisition? Small Divestiture 2005 2006 2007 2008 2009 2010 2011 ERP Upgrade ERP Goes Live ERP Project Begins Corporate Apps Complete 4
Initial Challenges As of Jan 1, 2007: $270MM business No IT infrastructure of our own 18 months to migrate from seller’s systems IT staff: 7 + 1 non-IT transition manager Most applications already selected but no plan to integrate them Challenge: traditional ERP model doesn’t fits well in a process industry
KapStone’sApproach Collaboration and Analytics Backbone
Risk Mitigation To facilitate system integration, we enforced the following requirements for our apps: Windows®-based SQL Server®-based Active Directory authentication Robust integration layer (BizTalk, SOAP or XML preferred) For cloud services: SOAP/XML interfacing Clearly define the process boundaries between systems i.e. once a transaction becomes $$$, feed to ERP! Maximize support from Microsoft
System Integration Model ERP OE/MES CRM BizTalk Connector BizTalk Connector Text Files Fiber CMMS XML/MSMQ XML XML Rail Lumber XML X12 BANKS XML EDI VAN Bus. Activity Monitoring All interfacing and integration is done through BizTalk Server. We support a variety of formats. Leverage BizTalk BAM to create self-service interface management portals for end users.
What About the Front End? Integrating multiple apps has many advantages: Flexibility No or little customization Easy to upgrade And one big disadvantage: Multiple, loosely linked reporting sources
Reporting Approach Like most companies, we start with static reporting, but also… Document the app’s data dictionary & build views Leverage the static reporting work to build BI cubes Involve the vendor in cube design (or use theirs first!) Bring in experts to design cubes as needed
Our Journey into BI ERP OE/MES Lumber CMMS Fiber SSRS PerformancePoint 1 – Started with static reporting – documented data dictionary! 2 – Built OLAP cubes for each app (or used vendor’s) 3 – All cubes are based on SQL/SSRS 4 – Support various reporting technologies 5 - Migrate to dynamic reporting in SharePoint
Customer-Facing Infrastructure customer-side integration platform customer DMZ transactions web services auth. data SSRS Active Directory 1-way trust replication Active Directory Active Directory
Benefits of KapStone’s Approach Cost competitive: SAP: $5,537/user/year1 KapStone: $2,371/user/year2 Upgradable: Little customization = quick, cost effective upgrades
Upgraded AX in under 6 months in 2009
Any system can be replaced or upgraded without affecting others Agile: Ability to add new systems quickly
Added Avantis in 6 months in 2009
Ability to integrate new acquisitions Sources: (1) Panaya Inc. 2009 SAP® Support Practices Benchmark Survey (2) KapStone 2009 ERP support budget exclusive of depreciation
The M&A Market is Heating Up “The volume of mergers and acquisitions grew in 2010 by 25%. (…) A survey of top bankers (…) expect deal volume to increase by at least 15% in 2011 from the previous year.” The Wall Street Journal, January 3, 2011
M&A Challenges: 10 Things to Remember Typical M&A challenges for IT: IT isn’t always “in the loop” Acquisitions are often behind on IT investments Pressure to get off seller’s systems quickly Pressure to consolidate financials & BI quickly Don’t always know where IT growth will be Manage Communication Security is a big concern IT must take the lead on non-IT activities Must be compliant within 12 months Acquisitions lead to divestitures
1. IT isn’t always “in the loop” Too often CIOs are not brought in early enough when a deal is negotiated.
Tell your Board and CEO that you must be brought in Day One.
Ask them if they’d want to know the true cost of merging IT asset before or after negotiating a price!
SCCM, Forefront Protection Server Script Kit, Visual Studio TFS
8. IT must take the lead on non-IT activities Many non-IT M&A activities result in IT work: merging COA AP, AR, HR, CRM ETL customer & item masters If not coordinated, this results in headache and rework for all
IT PMO should volunteer PM leadership
Share your collaboration tools with the other departments
Key Takeaways Build a flexible infrastructure Know your systems and know your cost structure IT must take a leading role in M&A activities Leverage your existing infrastructure to quickly and painlessly absorb acquisitions