Madness, Mergers, Acquisitions, and Divestitures


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Human beings take risks. In business, one of the riskiest moves company stakeholders can take is to acquire and merge with another company or to divest part of what they have. Despite the best initial intentions, fully half of all mergers, acquisitions, and divestitures fail. Whether your objective is acquiring new markets, realizing cost synergies, or obtaining new technologies, beware of the dangers, know what to anticipate, and, above all, be prepared. Enable a common path to success. Discover how you can keep your sanity and avoid the maddening side of mergers, acquisitions, and divestitures - for free.

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Madness, Mergers, Acquisitions, and Divestitures

  1. 1. SAP White Paper sAP for industrial Machinery & components Madness? Mergers, Acquisitions, And divestitures
  2. 2. COnTenT 4 Executive Summary 5 In the Name of Growth 5 risky Business 5 A common Path to success 7 Premerger Assessment Phase 7 the role of it 7 gain the insight You need 9 Postmerger Integration Phase 9 the Pitfalls of Postmerger integration 10 Bridging the gaps 11 Solutions for Mergers, Acquisitions, and Divestitures 11 solutions for the Premerger Assessment Phase 11 strategy Management 11 Business Planning and consolidation 12 solutions for the Postmerger integration Phase 12 identity Management 12 resource and Portfolio Management 13 Master-data Management 14 solutions for Building a Business Process Platform 14 Building on an integrated it environment 15 The Hallmarks of Successful Mergers and Acquisitions 15 Where to go to Beat the odds
  3. 3. exeCuTive suMMary Avoiding FAilure in Mergers, Acquisitions, And divestitures Human beings take risks. in business, Why do so many MAd attempts fail? one of the riskiest moves company this paper discusses why failure hap- stakeholders can take is to acquire and pens and how to prevent it by following despite continued merge with another company or to the overriding best practice in successful record setting in global divest part of what they have. despite acquisitions, mergers, and divestitures: the best initial intentions between the preparedness. Knowing how to prepare, deals, at least half are merging companies, many mergers, what to prepare, and when to prepare. doomed to failure. acquisitions, and divestitures produce results far below expectations. For At what point in going MAd does failure some companies, the experience can most often occur? the paper identifies be more than maddening – it can be the phase in the merger and acquisition deadly, ending with the demise of the process where the breakdown occurs. business. And it describes what is required to prevent that failure. Will your merger, acquisition, or divesti- ture (appropriately enough, the acronym Finally, what do you need to assure both is MAd) succeed or fail? if you answer sanity and success? this paper presents that question with historical eyes that the steps to swiftly and precisely exe- look back at major mergers for almost cute a migration path using a specific set 20 years, you might as well toss the of solutions for successful mergers, coin. Your MAd journey has a 50–50 acquisitions, and the divestitures that chance of failing. such a high failure rate often result. these solutions support should raise a red flag to any company a flexible it environment, the important getting ready to go MAd. premerger assessment phase, and the critical postmerger integration support However, despite these odds, mergers – without which the whole MAd deal continue to increase unabated world- can go bad. wide, and the failure rate is keeping pace. companies will continue to make the same mistakes – unless they can get advice from white papers like this one. 4 SAP White Paper – Madness? Mergers, Acquisitions, and divestitures
  4. 4. in The naMe Of GrOwTh BeAting tHe odds it is the age of the megadeal. Fueled by ongoing consolidations, pressures from globalization, and a rise in interest from success depends on your company’s ability to meet private equity, the number of mergers the challenges of postmerger integration. and acquisitions is growing at a frenetic pace around the globe – and has been for years. Between 2002 and 2005, for and services, reporting results for a in an sAP study completed in december example, merger values in the united newly combined entity, and setting up 2006, 175 leading companies spoke states rose from us$462 billion to processes to encompass new divisions about the business initiatives they under- over $1.5 trillion – a 35.6% compound are no small tasks. success depends took to ensure operational excellence or annual growth rate.1 on your company’s ability to meet the improve business agility – and how it challenges of postmerger integration. supported these initiatives.3 For compa- Risky Business these challenges are especially critical nies pursuing mergers and acquisitions, for iM&c manufacturers, as combining it organizations played a significant role Whether they are pursuing market lead- complex supply chains and assimilating in reducing the time required to syner- ership, hoping to leverage synergies unfamiliar products and processes can gize assets, processes, and systems across an installed base, or needing be daunting. between the merged companies. the economies of scale, most industrial study revealed a common path (see manufacturing and components (iM&c) However, the time to address post- figure) successful it organizations used companies engage in mergers, acquisi- merger challenges to ward off failure is to support mergers and acquisitions. tions, and divestitures for two reasons not only when they happen, but a long – growth and the promise of huge bene- time before – in the premerger assess- in addition, the following technology fits and gains to shareholders. However, ment phase. during this phase, it is elements are required to support suc- growth is fodder for risk, and few areas important to define the role of your it cessful mergers, acquisitions, and of business are as risky as mergers and group in facilitating a rapid and effec- divestitures: acquisitions. despite continued record- tive integration. to assure a successful • tools and services to assist your it setting global deals, at least half are merger, an integrated business process team in conducting the premerger doomed to failure. in fact, Wharton platform is required to ensure integrated assessment for potential synergies research places the range of failure at processes and harmonized information. • A flexible and adaptable it environ- 50% to 80% – risky business, indeed.2 to execute mergers flawlessly, many ment to help it merge and align pro- companies that lead in mergers, acqui- cesses that support your corporate A Common Path to Success sitions, and divestitures use such a plat- growth strategy form. it’s involvement in implementing • An end-to-end solution for the com- Mergers typically fail at the process and and supporting the platform throughout mon path to accelerating postmerger systems integration phases. integrating the planning and execution phases is integration the sales force to sell new products essential. 1. Why do so Many Mergers Fail? (Knowledge@Wharton,, March 30, 2005). 2. ibid. 3. enabling growth through Mergers and Acquisitions, sAP executive insight, (sAP Ag, 2007), p. 7. SAP White Paper – Madness? Mergers, Acquisitions, and divestitures 5
  5. 5. 6–18 months • Govern your IT environment • Consolidate processes/systems 3–6 months • Bring users on board rapidly Optimize IT • Manage users’ identity consolidate a portfolio of 4–6 months acquired applications and platforms • Consolidate integration bus Empowered users • Develop composite extend processes to Premerger customers, suppliers, and Business impact employees using the most • Implement master-data Adaptable processes appropriate user interface management rapidly merge processes, • Consolidate business realize synergies with com- intelligence platforms posites to cross-sell Trusted information Build an accurate business case for the merger based on common suppliers, customers, and products, and faster con- solidation of financial reporting Months Figure: A Common Path to Successful Mergers, Acquisitions, and Divestitures 6 SAP White Paper – Madness? Mergers, Acquisitions, and divestitures
  6. 6. PreMerGer assessMenT Phase Building Business vAlue The Role of IT the overall software architecture and shared customers implementation of end-to-end business You need to assess the existing relation- the premerger assessment determines processes, your it team can ascertain ships of shared customers and find ways the value of the merger, acquisition, or potential security vulnerabilities that to retain those customers after the divestiture. to execute an acquisition, should be addressed during postmerger merger or acquisition. unified master you may need a strategy management integration to mitigate risk to the acquir- data and integrated applications ensure solution to help you make the right ing company. in some cases, this may that the merged company has insight decision. the same solution can also include the implementation of an identity into profitable, top-line customers and help you manage your goals, initiatives, management solution. can focus on them immediately. these and metrics during and after the merger; customer relationships are vital to it can make it easy for individuals Gain the Insight You Need iM&c manufacturers, as the combined and groups to collaborate within your company can now leverage economies organization. the premerger assessment phase sup- of scale to serve joint customers faster plies the insight you need into the fol- and more efficiently. during the assessment, it teams can lowing aspects of a merger, acquisition, address any limitations to rapid post- or divestiture. merger integration. they may, for example, integrate processes, identify master-data management (MdM) issues Goss International Corporation Results with SAP: that need resolution, or replace inflexible • 95% fit between goss’s needs and systems that inhibit change. they also Industry: industrial machinery and sAP best-practice road maps for assess the presence or lack of synergies components industrial machinery and compo- between the merging companies and Revenue: us$1.2 billion nent manufacturers determine how this may impact the new employees: 4,000 • enhanced change order control and company’s infrastructure and focus on core objectives of aligning applications. Summary: goss makes commercial processes and features by follow- web presses, and its presses are ing best-practice road map the premerger assessment phase pro- huge – some four stories high and as • launch of new data center in six vides an opportunity to conduct a peer- long as a football field. Following the months to-peer analysis comparing the acquiring acquisition of Heidelberg Web sys- • single global instance of sAP erP and target companies. You can analyze tems, goss found itself saddled with and a single database to support and compare the value of master data redundant data, duplicate systems – 1,200 users at goss sites in 6 for all enterprise business applications, including 75 separate applications – countries including enterprise resource planning and nonstandard business process- • Annual savings of $5 million in data (erP), customer relationship manage- es. goss needed to standardize center contract maintenance fees, ment (crM), supplier relationship man- processes on a single instance of the plus lower support costs due to agement (srM), and Hr applications. sAP® erP application. it was also reduced it complexity hobbled by the cost of a data center • enhanced analyses and planning You can also assess each company’s service agreement and needed to with integrated financial information current governance and compliance create its own data center. therefore, • improved service and sales with procedures and the use of management goss set an objective to achieve accurate, up-to-date customer tools for governance, risk, and compli- “one it” by standardizing its global information ance (grc). in this regard, by evaluating business processes. • reduced inventory using shared services SAP White Paper – Madness? Mergers, Acquisitions, and divestitures 7
  7. 7. Prospects or target Markets Products technology landscape By analyzing customer data to identify By assessing products in a combined Finally, the premerger assessment size, geographic location, or industry, portfolio, companies can determine includes an evaluation of the overall the acquiring company can assess overlap and pricing inconsistencies, synergy of it systems, including the potential market growth. this informa- identify redundant or similar products enterprise architecture, hardware, net- tion also has direct impact on where to and their impact on customers, and works, data stores, technology platforms, locate manufacturing, distribution, and communicate product transition plans business software, and user interfaces. sales facilities. to joint customers. this step ensures the evaluation is essential to planning that all engineering, materials manage- your comprehensive migration path and ment, and manufacturing operations more accurately estimating potential are in synch and not unknowingly com- savings. the premerger assess- peting against each other or duplicating efforts. ment phase provides an opportunity to conduct employees By assessing roles and responsibilities, a peer-to-peer analysis companies can pinpoint overlap and comparing the acquiring work with the Hr organization to identify and retain top talent. it is critical that and target companies. employee benefits and compensation continue without interruption and that employees realize quickly that they can shared vendors rely on the merged entity for day-to-day Merging companies need to identify operational requirements. the cultural duplicate vendors across various pro- differences of shop-floor employees curement activities to streamline costs that have never worked together in the and form an efficient merged entity. past can often be the first significant consolidating vendors and leveraging hurdle of an iM&c merger. buying power with higher volumes are key drivers for iM&c mergers. 8 SAP White Paper – Madness? Mergers, Acquisitions, and divestitures
  8. 8. POsTMerGer inTeGraTiOn Phase Building end-to-end Business Processes The Pitfalls of Postmerger often overestimate potential synergies there may be other factors that hinder Integration and underestimate costs created by the your ability to retain top employees, merger. As a result, mergers frequently such as undefined or duplicate roles, A flexible and unified it environment fail to achieve expected revenues. the lack of consolidated employee data, facilitates postmerger integration by or incompatible Hr systems. maximizing interoperability, shortening customer loss development time, and enabling seam- one of the top priorities in a merger is supplier consolidation less integration internally and across determining which customers are profit- in a merger, cost reduction through merged companies. With such an envi- able and creating a plan to retain them. consolidation of suppliers can add val- ronment, your it organization can deliver surprisingly, the failure to successfully ue to the supply chain. However, in significant value in the postmerger inte- transition customers to the newly many mergers, these consolidation gration phase. merged entity is a common postmerger opportunities are often overlooked. You story. this failure can happen for many miss opportunities for collaborative A flexible it environment can help reduce reasons, such as lack of consistent efforts with partners in product devel- the risk and effort of integration. in such crM processes, product duplicates, a opment, materials management, supply an environment, it can unify the it infra- changed product portfolio, loss of a chain, manufacturing, marketing, and structure of the merged companies by trusted sales team, and inconsistent sales. setting an order of priority and consis- pricing, maintenance, and support. tently communicating changes to the Poor tracking of Key Performance employees, customers, and partners employee Attrition indicators impacted by the merger. in addition, a it is important to understand that when A successful merger depends on man- flexible it environment helps your it team employees leave as a result of a merg- agement having visibility into the per- to drive cost savings by identifying and er, it is not the underperformers who formance of the combined companies, eliminating redundant data, processes, defect; it is usually the top employees. but this may not be possible with dispa- software, or systems. one study of failed acquisitions found rate systems and databases. neverthe- that management attrition rates soared less, the ability to measure and analyze A flexible and unified it environment is 47% over the three years following the key performance indicators, even one of your best defenses against the acquisition, with employee satisfaction before underlying systems are integrat- pitfalls of postmerger integration, which dropping by 14% and productivity drop- ed, is mandatory to understanding the include the following. ping by 50%.4 According to a study by success, partial success, or failure of a Hewitt Associates of Asia-Pacific com- merger or acquisition. Without the abili- overestimating synergies panies, top Hr issues in mergers, ty to track performance, you cannot it is not difficult to overestimate the value acquisitions, and divestitures include identify issues early enough to avoid and underestimate the timing of a merger retention of key employees, compliance problems and the resulting loss of reve- without the right data or tools to evaluate with applicable laws, and alignment of nue control. and calculate synergies. Merger makers culture, compensation, and benefits.5 4. Merger & Acquisition integration excellence – executive summary (Best Practices llc online database,!opendocument, 2000). 5. “the real cost of the deal,” Hewitt quarterly Asia Pacific, volume 5, issue 1 (Hewitt Associates llc, 2007). SAP White Paper – Madness? Mergers, Acquisitions, and divestitures 9
  9. 9. slow and incomplete integration product or market breadth while mini- Again, if you have prepared early and Booz & company research suggests mizing costs by integrating new prod- comprehensively for a merger, acquisi- that more mergers fail because of inad- ucts into key systems and centralizing tion, or divestiture and have aligned equacies in the integration process MdM. Finally, you can enable increased your processes with your growth strat- than because of a fundamental flaw in business scale by supporting expanded egy, you can speed and simplify the the concept.6 Without a flexible and locations, offerings, and customers postmerger integration. Just as essen- adaptable it environment, it can be with new, quickly composed services tial, you can also create a stable and extremely difficult to merge systems, and applications. From a manufacturing reliable environment to support your processes, and assets. in a well- perspective, the faster everyone is core business during the transition. organized merger, this challenge is using the same data and same solu- addressed in the premerger assess- tions, the faster the benefits of the ment phase, so that the adequate it merger or acquisition can be realized. environment is in place at the post- merger integration. Bridging the Gaps A flexible it environ- By integrating existing applications and ment can help reduce creating new shared-user interfaces, the risk and effort of you can enable end-to-end business processes across merged organiza- integration. tions. You can also support expanded 6. Post-Merger integration (, Booz & company [n.A.] inc.). 10 SAP White Paper – Madness? Mergers, Acquisitions, and divestitures
  10. 10. sOluTiOns fOr MerGers, aCquisiTiOns, and divesTiTures Building BlocKs to BeAt tHe odds Across manufacturing and over 25 in many mergers and acquisitions, the For more information on sAP strategy industries, sAP has decades of exten- application also enables you to expedi- Management and other enterprise per- sive experience in global mergers, tiously and completely decouple a busi- formance management solutions, go to acquisitions, and divestitures. From ness unit you need to spin off, or this experience, sAP has learned how decouple an unwanted unit you gained management/pcm/index.epx. to apply specific sAP® solutions and in an acquisition. services to facilitate an end-to-end Business Planning and consolidation solution. sAP resources – ranging from Before, during, and after the acquisition to manage and monitor the performance merger, acquisition, and divestiture and merger, strategy management of your mergers, acquisitions, and consulting services to the application functionality helps you drive execution divestitures, you need accurate, timely building blocks that result in a flexible across the enterprise. it helps you man- financial and operational data so you can it platform – help you navigate through age your goals, initiatives, and metrics effectively plan, budget, forecast, and the preassessment and postmerger for performance in a way that enables analyze. during a merger or acquisition, phases with confidence and speed. everyone in your company to truly you also need the ability to integrate understand how your goals affect day- corporate and departmental planning, Solutions for the Premerger to-day and long-term operations, how intelligently model cost scenarios, and Assessment Phase to support them, and how to measure perform sensitivity analyses to deter- success. only when decision making mine operational budgets based on the sAP solutions and their roles in is honed and all accountable individuals strategic plans and assumptions affected supporting the phases of mergers, are linked and aligned to your goals, by the acquisition, merger, or divestiture. acquisitions, and divestitures, beginning initiatives, and metrics can your organi- lastly, you need a way to ensure a fully with the crucial premerger assessment zation achieve its short-, medium- and documented audit trail and compliance phase, include the following. long-term objectives. with guidelines for consolidating and reporting company information internally strategy Management in the broad term, with sAP strategy and externally for the new entity. the sAP strategy Management appli- Management and solutions for enter- cation is part of sAP solutions for prise performance management, your For use during the premerger assess- enterprise performance management – company can improve its agility, align- ment and postmerger integration phas- a comprehensive set of solutions that ment, visibility, and confidence to opti- es – and beyond – the sAP Business help your company capitalize on the mize control and gain competitive Planning and consolidation application value of your existing data assets. advantage. enterprise performance can meet your budgeting, planning, Because extension of the enterprise is management solutions cover enterprise consolidation, and reporting require- implicit in most acquisitions and mergers, planning, financial consolidation, profit- ments in a single application and user you may require other solutions in the ability and cost management, financial interface. it supports the full array of enterprise performance management performance management, and analyt- top-down and bottom-up financial and set of solutions, in addition to strategy ics. All sAP solutions for enterprise operational planning needs, as well as management. performance management can integrate the consolidation processes necessary with sAP Business suite applications; to ensure a timely financial close. As a sAP strategy Management helps you sAP solutions for governance, risk, result, you can gain the confidence to make the right decisions during the and compliance; and the sAP meet increasingly stringent regulations execution of an acquisition and align the netWeaver® technology platform. and reporting requirements across the acquired company’s growth strategy globe. For iM&c companies, global with yours. As divestitures are implicit trade and environmental compliance SAP White Paper – Madness? Mergers, Acquisitions, and divestitures 11
  11. 11. play key roles when operations are merged. As with financial compliance, global trade and environmental regula- Without a flexible and adaptable it environment, it can tions must be uniform across all manu- be extremely difficult to merge systems, processes, facturing and distribution locations. and assets. sAP Business Planning and consolida- tion can help you improve decision making with risk-adjusted planning that (soA) landscapes. the identity manage- (sAP rPM) application helps you maxi- identifies the probability a situation may ment component works across systems mize the value, balance, and strategic occur, enabling you to take preemptive and across business processes to alignment of your product portfolio. in action. Your managers can use the manage identities and ensure security support of your organization’s need for application to collaborate in a unified in real time. strategic and operational portfolio man- landscape, streamlining the process of agement, sAP rPM provides an enter- creating and approving plans and bud- As companies service-enable their prise-level solution for the management gets. in addition, the effective use of applications, the combination of distrib- of a full range of portfolios, including built-in business-process and self-service uted enterprise services with powerful product innovation management, pro- flows reduces time spent on modifying cross-system business processes fessional service, and enterprise it. common business processes, and an requires that identities are managed in an intuitive interface with familiar office tools integrated, straightforward, and simple sAP rPM enables you to better control helps increase employee productivity. manner. By combining proven, flexible, and innovate projects, processes, prod- the application minimizes business and and easy-to-configure identity manage- ucts, and services across their life compliance risks by supporting trans- ment software with industry-leading cycles. Powered by sAP netWeaver, parent financial data and a single version business applications and an soA- sAP rPM “snaps on” to existing het- of the truth to enable fast and accurate based technology platform, sAP can erogeneous it landscapes and leverages management and statutory reporting. offer an end-to-end identity management data from disparate systems, including solution. this solution increases the Hr, financial, project management, and Solutions for the Postmerger flexibility and agility of business units desktop systems. this enables new, Integration Phase when managing employee identities cross-functional business processes and and when managing identities across provides ready insight into operations. the solutions you need to support company boundaries with customers, postmerger integration depend on the distributors, or suppliers. For example, built-in integration with nature of your business and the mergers systems running sAP and non-sAP soft- and acquisitions you undertake. the Because the component’s virtualization ware provides transparency into actual following sAP solutions, however, are and user provisioning technologies are project costs, forecasts, baselines, and basic and essential to supporting the built on soA, it can offer identity man- other key performance indicators across postmerger integration phase. agement as a service – providing scal- your entire portfolio. deep integration able, real-time, and standards-based with your Hr solution, including visibility identity Management access to identity information residing into the organizational structure to sup- the sAP netWeaver identity Manage- in multiple repositories. port both line-of-business and talent ment component gives you the ability management, enables resource alloca- to centralize identity management and resource and Portfolio Management tion and strategic capacity planning helps to increase security across hetero- For mergers and acquisitions, the sAP based on up-to-date information on geneous, service-oriented architecture resource and Portfolio Management skills, availability, and approval work- 12 SAP White Paper – Madness? Mergers, Acquisitions, and divestitures
  12. 12. flows. Furthermore, by drawing on data profit potential. it enables you to opti- Enable Dynamic Integration from disparate applications and systems, mize your product portfolio by retaining during postmerger integration, a com- flexible dashboards and sophisticated high-margin products and spinning off prehensive MdM solution offers flexi- analytics enable continuous monitoring the rest. And you can rationalize your bility by supporting dynamic integration of your portfolio’s performance. workforce by identifying key skill sets in a complex, heterogeneous environ- and matching your best employees with ment filled with different systems, data- during mergers and acquisitions, sAP available jobs. bases, repositories, and applications. rPM aligns activities, resources, and MdM functionality gives you the ability budgets with business priorities. so you Rationalize Your Processes and to bring together data from many differ- can maximize the value of your portfolio How People Use Them ent sources and rationalize it easily and and leverage your existing investments in a merger, master-data management quickly. in it systems, skills, and resources. first comes into play following the cre- And, together with other sAP solutions ation of the physical infrastructure – Provide Centralized Data and Support powered by sAP netWeaver, sAP rPM selecting the hardware, servers, and for Remote Locations can support your new-product develop- networks to facilitate information while today, many companies still do not ment and introduction processes. removing excess infrastructure to save have an enterprise-wide master-data money. After the infrastructure is ready, management solution, resulting in low- Master-data Management an MdM solution is used to rationalize quality data that is often difficult to Because the rationalization and integra- the business applications that support access. However, a comprehensive tion of data and information is critical to different development cycles or that MdM solution houses master data in a supporting mergers, acquisitions, and come from certain vendors. this is dif- central repository that is easy to divestitures, a master-data management ficult to achieve and takes much longer access and use. With such a solution, solution is probably the most essential without an MdM solution. At this point, even as the postmerger integration is solution requirement. Part of the sAP many companies outsource or consider proceeding, you can have the accurate netWeaver technology platform, the sAP shared services. and consistent metrics and analytics netWeaver Master data Management you need to stick with your growth (sAP netWeaver MdM) component is even more difficult than rationalizing strategy. a comprehensive solution capable of applications, however, is rationalizing supporting true enterprise-wide master- processes and how people use them. As companies implementing an MdM data management. to achieve this during the postmerger solution build a single view of products integration, you need to create a single and customers, they can focus more Master Your Data view of your products, materials, precisely on where they actually “do” sAP netWeaver MdM not only helps customers, and employees. A compre- the business process – where they you create the master data resulting hensive MdM solution enables you to launch an available-to-promise inquiry from an acquisition and merger, but it capture this view; without this, it can for a customer or start the develop- also empowers you to master your data. take a long time to accrue the benefits ment of a new product. they know that in the context of mergers, acquisitions, of the acquisition and subsequent the applications supporting these activ- and divestitures, sAP netWeaver MdM merger. in truth, it can take so long to ities may be quite remote from where helps you aggregate financial data, achieve benefits that management may the master data itself is created and rationalize business processes, and gain lose focus on the whole process. With managed. during postmerger integra- a single view of products, customers, the single view enabled through an MdM tion, a comprehensive MdM solution and employees. it helps you retain cus- solution, however, the effectiveness of supports the complex business process- tomers by focusing on those with the the acquisition can be expedited rapidly, es and services you need for disparate deepest relationships and greatest and benefits can be realized sooner. and remote operations. SAP White Paper – Madness? Mergers, Acquisitions, and divestitures 13
  13. 13. Best Practices in Master-Data into a more flexible business process reusable enterprise services Management platform. A business process platform sAP solutions that support business the best practice of preparation applies is a unified environment – based on activities are modularized into process to master-data management, because soA – that companies implement to steps and exposed through enterprise master-data management should be perform business processes across services. these enterprise services part of your portfolio approach and the it landscape. share common business semantics to infrastructure prior to an acquisition and improve governance and communica- merger. it allows you to analyze the in soA software can be defined and tion between applications. merging company’s master data, recon- written as building blocks of Web ser- cile it as a preliminary step, and use vices that conform to a set of standards unified technology Foundation that data to execute the acquisition and and principles, which allows for their sAP netWeaver unifies technology into merger transactions. if you’re a manu- execution and reuse. Based on open a stable foundation that enables the facturing holding company, for example, standards, Web services facilitate smooth operation of core applications you can make master-data management greater interoperability between software across a heterogeneous environment. part of your portfolio approach and systems, integration of applications, it also supports rapid innovation by enable new acquisitions to merge with and rapid innovation of new business delivering hundreds of Web services your company quickly and efficiently processes. that can be combined and extended via through the use of a global template. easy-to-use composition tools. to deploy a business process platform, A second best practice to follow in it organizations can start with the sAP Building on an integrated it mergers, acquisitions, and divestitures netWeaver technology platform and environment is defining scope. if you are acquiring a software from sAP to help manage cur- With a business process platform en- company because of its sales channels, rent business processes more efficiently abled by sAP software and technology, you would implement master-data man- and cost-effectively. it teams can build it organizations can respond rapidly to agement focused on the customer. if you upon these sAP solutions and extend change, drive business process innova- are acquiring a company to rationalize their business process platforms by tion, and reduce costs across the your product or supply base, master-data adding sAP and non-sAP functionality merged companies. For example, to- management would focus on product to meet specific needs. gether with the sAP netWeaver Process and supplier rationalization and on man- integration offering, sAP netWeaver ufacturing consolidation. Preparing, sAP provides the following building MdM can consolidate data, remove defining, and publishing the scope blocks to support a business process duplicates, and merge customer records. before you put people on the ground platform. then, using a sales cockpit and the helps you achieve benefits more quickly. sAP netWeaver Portal component, ready-to-execute software for you can enable account managers to Solutions for Building a Business Business Processes access all available information about a Process Platform sAP applications, such as those that particular customer and perform com- comprise the sAP Business suite family plex pricing calculations quickly. to help an it organization achieve the of business applications, are soA agility it needs to support mergers, enabled and provide functionality for acquisitions, and divestitures, sAP soft- running core business processes. this ware, services, and technology support functionality can be adapted easily the evolution of existing it infrastructures using enterprise services. 14 SAP White Paper – Madness? Mergers, Acquisitions, and divestitures
  14. 14. The hallMarks Of suCCessful MerGers and aCquisiTiOns strong leAdersHiP, culturAl AdAPtABilitY, And FlAWless execution Whether the objective of your acquisi- critical in supporting effective commu- tion or merger is acquiring new markets, nication to the organization. When joint realizing cost synergies, or obtaining Whether the objective achievements are visible through stan- new technologies, achieving it depends of your acquisition or dardization, they can be communicated on preparation, strong leadership, cul- more rapidly. this, in turn, creates tural adaptability, and flawless execution. merger is acquiring new greater employee satisfaction and a As discussed earlier, many leaders who markets, realizing cost positive outlook on the future prospects flawlessly execute mergers, acquisitions, of the merged business. and divestitures leverage an integrated synergies, or obtaining business process platform to help them new technologies, Where to go to Beat the odds achieve their objectives, which are the to take the “MAdness” out of mergers, following: achieving it depends acquisitions, and divestitures and level on preparation, strong the playing field for your iM&c company, Standardization. leaders know speed visit sAP today at is of the essence. When are the board leadership, cultural /solutions/executiveview/finance and financial markets expecting results adaptability, and flaw- /index.epx. from the merger? How long will cus- tomers be patient if there is a service less execution. disruption? only through standardized processes can an organization scale and provide consistent results. A busi- Control. leaders are aware of the ness process platform is the fastest way risks. Which employees and customers to drive common business practices need to be retained at all costs? Which across a merged organization. employees and customers are most likely to defect? Without control over Visibility. leaders need to determine these and other critical aspects of the which savings potential they can realize business, the answers remain guess- without interrupting or jeopardizing the work. And guessing is risky. business. in which market segments can they cross- and up-sell? Acting upon Communication. leaders focus on cul- the right information of the joint entity ture and people. How will the organiza- is critical. only integrated systems can tion cope with change? What values provide the needed information at the define the new organization? standard- speed of change. ization, visibility, and control are all SAP White Paper – Madness? Mergers, Acquisitions, and divestitures 15
  15. 15. 50 091 473 (08/09) Printed in usA. ©2008 by sAP Ag. All rights reserved. sAP, r/3, xApps, xApp, sAP netWeaver, duet, Partneredge, Bydesign, sAP Business Bydesign, and other sAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of sAP Ag in germany and in several other countries all over the world. Business objects and the Business objects logo, Businessobjects, crystal reports, crystal decisions, Web intelligence, xcelsius and other Business objects products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of Business objects s.A. in the united states and in several other countries. Business objects is an sAP company. All other product and service names mentioned are the trademarks of their respective companies. data contained in this document serves informational purposes only. national product specifications may vary. these materials are subject to change without notice. these materials are provided by sAP Ag and its affiliated companies (“sAP group”) for informational purposes only, without representation or warranty of any kind, and sAP group shall not be liable for errors or omissions with respect to the materials. the only warranties for sAP group products and services are those that are set forth in the express warranty statements accompanying such products and services, if any. nothing herein should be construed as constituting an additional warranty. /contactsap