1) KapStone is a paper and packaging company that plans to grow through acquisitions to $2-5 billion in revenue within 2-5 years. 2) KapStone built a flexible IT infrastructure using Microsoft technologies like SQL Server, BizTalk, and SharePoint to easily integrate new acquisitions. 3) When pursuing acquisitions, the CIO must be involved early to plan the IT integration and ensure acquired companies' systems can be migrated efficiently onto KapStone's infrastructure.

1. Leveraging Microsoft Technologies to Enable M&A GrowthByChristophe DeslandesChief Information OfficerKapStone

2. AboutKapStone 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.

3. KapStone Today2 Kraft paper mills+ 1 lumber millHeadquartered near ChicagoPublicly traded on NYSE± $800MM revenue1,600 employeesIT team: 30 full-time, 39 FTE

4. KapStoneTimelineListedNASDAQListedNYSESecondAcquisitionFirstAcquisitionFoundedAs S.P.A.C.ThirdAcquisition?SmallDivestiture2005200620072008200920102011ERPUpgradeERPGoesLiveERPProjectBeginsCorporateAppsComplete4

5. Part 1Building a Company

6. Initial ChallengesAs of Jan 1, 2007:$270MM businessNo IT infrastructure of our own18 months to migrate from seller’s systemsIT staff: 7 + 1 non-IT transition managerMost applications already selected but no plan to integrate themChallenge: traditional ERP model doesn’t fits well in a process industry

7. KapStone’sApproachCollaboration and Analytics Backbone

8. Technology StackERPCMMSOE/MESFiberCRMLumber Presentation,BI, DMS & Collaboration Orchestration DBMS/BIConfigurationPlatform

9. Risk MitigationTo facilitate system integration, we enforced the following requirements for our apps:Windows®-basedSQL Server®-basedActive Directory authenticationRobust integration layer (BizTalk, SOAP or XML preferred)For cloud services: SOAP/XML interfacingClearly define the process boundaries between systemsi.e. once a transaction becomes $$$, feed to ERP!Maximize support from Microsoft

10. System Integration ModelERPOE/MESCRMBizTalkConnectorBizTalkConnectorText FilesFiberCMMSXML/MSMQXMLXMLRailLumberXMLX12BANKSXMLEDI VANBus. Activity MonitoringAll 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.

11. What About the Front End?Integrating multiple apps has many advantages:FlexibilityNo or little customizationEasy to upgradeAnd one big disadvantage:Multiple, loosely linked reporting sources

12. Reporting ApproachLike most companies, we start with static reporting, but also…Document the app’s data dictionary & build viewsLeverage the static reporting work to build BI cubesInvolve the vendor in cube design (or use theirs first!)Bring in experts to design cubes as neededERP/CRM must be system of reference

13. Common taxonomy is paramount!Our Journey into BIERPOE/MESLumberCMMSFiberSSRSPerformancePoint1 – 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/SSRS4 – Support various reporting technologies5 - Migrate to dynamic reporting in SharePoint

14. Customer-Facing Infrastructurecustomer-sideintegrationplatformcustomerDMZtransactionswebservicesauth.dataSSRSActive Directory1-waytrustreplicationActive DirectoryActive Directory

15. Benefits of KapStone’s ApproachCost competitive:SAP: $5,537/user/year1KapStone: $2,371/user/year2Upgradable:Little customization = quick, cost effective upgradesUpgraded AX in under 6 months in 2009Any system can be replaced or upgraded without affecting othersAgile:Ability to add new systems quicklyAdded Avantis in 6 months in 2009Ability to integrate new acquisitionsSources: (1) Panaya Inc. 2009 SAP® Support Practices Benchmark Survey(2) KapStone 2009 ERP support budget exclusive of depreciation

16. Part 2Support Growth Through M&A

17. 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

18. M&A Challenges: 10 Things to RememberTypical M&A challenges for IT:IT isn’t always “in the loop”Acquisitions are often behind on IT investmentsPressure to get off seller’s systems quicklyPressure to consolidate financials & BI quicklyDon’t always know where IT growth will beManage CommunicationSecurity is a big concernIT must take the lead on non-IT activitiesMust be compliant within 12 monthsAcquisitions lead to divestitures

19. 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.

20. Ask them if they’d want to know the true cost of merging IT asset before or after negotiating a price!

21. Be ready with:migration cost modelssystem documentation (especially interfacing)methodologiesapp & technologies portfoliostandards

22. 2. Acquisitions are often behind on IT investmentsBusinesses being sold tend not to invest much in IT!Be ready to upgrade servers right away

23. Be ready to roll out new desktops (real or virtual) right away

24. Acquisitions are a good opportunity to get out of unwanted support contracts  upgrade Day One!

25. Technologies to leverage:Hyper-V server virtualization, Terminal Services, desktop virtualization

26. 3. Pressure to get off seller’s systems quicklyIn case of a divestiture, some apps may be running on the seller’s infrastructure.TSAs are costly.Negotiate rights to transfer licenses or run temporary instances

27. Go after low hanging fruits (email, DMS)

28. Migrate legacy apps to virtual instances in your datacenter

29. Technologies to leverage:

30. Hyper-V virtualization4. Pressure to consolidate financials & BI quicklyConsolidation of financials and operating KPI are essential.Aim for Day 30

31. Upgrade from Excel-based consolidation:

32. Leverage middleware

33. Automate consolidation (at least on your end)

34. Technologies to leverage:

35. BizTalk, SQL Server, SharePoint5. Don’t always know where IT growth will beWhat will grow the most: email? Storage? Transactions? Network? Apps? Desktops?Buy yourself flexibility ahead of time with clustering:

36. Exchange

37. BizTalk

38. SQL Server

39. Terminal Server

40. Hyper-V consoles(you can have a 1-node cluster!)Virtualize all other apps for easier migration to bigger hardware6. Manage CommunicationLoose lips sink ships – and acquisitions!People recognize due diligence when they see it

41. Keep them in the loop but control leaks

42. Social media isn’t making this any easier

43. Negotiate a communications plan with the CEOThe IT staff will be very concerned about their futureCommunicate honestly

44. Communicate early and often

45. Listen to their concerns

46. Explain that there will be changes and why

47. Make the case for delayed downsizing7. Security is a BIG concernSecurity practices may not be up to your standards.Some employees may be disgruntled.Insist on antivirus being up to date as a condition of sale

48. Lay down the law on Day One:

49. Password complexity rules

50. Computer Use policy

51. Firewall rules

52. Server protection & configuration management

53. Engage an independent security auditor

54. Technologies to leverage:

55. SCCM, Forefront Protection Server Script Kit, Visual Studio TFS8. IT must take the lead on non-IT activitiesMany non-IT M&A activities result in IT work:merging COAAP, AR, HR, CRM ETLcustomer & item mastersIf not coordinated, this results in headache and rework for all IT PMO should volunteer PM leadership

56. Share your collaboration tools with the other departments

57. Provide testing sandboxes

58. Technologies to leverage:

59. SharePoint, Hyper-V virtualization, MS Project9. Must be compliant within 12 monthsPick your poison: SOX, PCI, HIPAA, SEC, …You’ll have at most 12 months for the new unit to be compliant!Plan for robust and well documented integration, even if temporary

60. Implement Change Management, Access Control and Configuration Management policies on Day One

61. Technologies to leverage:

62. BizTalk Server, SCCM, Visual Studio TFS10. Acquisitions lead to divestituresAcquisitions often lead to divestitures:due to regulatory constraintsto finance M&A activitiesfor business alignmentPlan for future divestitures:Have a methodology!

63. Virtualize divisional apps and integrate them through middleware to allow for easy decommissioning

64. Technologies to leverage:

65. BizTalk, Hyper-V virtualizationKey TakeawaysBuild a flexible infrastructureKnow your systems and know your cost structureIT must take a leading role in M&A activitiesLeverage your existing infrastructure to quickly and painlessly absorb acquisitions