The key principle behind M&A is that joining two companies is more valuable than operating them separately. But we all know there are so many decisions regarding the two businesses that need to be made to secure the value of the consolidation. One of these considerations is often about software or IT and what data analytics solution the 'new' company should choose.
Many scenarios are at play here, such as two competing solutions in use, an ERP dictating what data analytics solution is deployed or challenges with team members adopting the solution.
In 2018, global M&A activity was valued at US$3.53 trillion. Depending on which research you look at, failure rates range from 50-70%, putting the cost of failed M&A well into the trillions.
We suggest retaining the data analytics function of either business to fulfill the readiness side and retain the benefits of keeping an existing data-driven culture.
Clean data for due diligence
Data management in this context is about preparing the legacy ERP data for analysis and eventual migration into a different ERP. The overriding standard of data preparation in this sense is good data in, good data out; and of course the inverse, bad in, bad out. This means that if you hope to get useful data from that old ERP system, you have to really work through it and clean it up.
So how can you use Phocas in this process? The greatest asset you get with Phocas is the ability to quickly and easily import data from different data sources. Then once you get that data into Phocas, you can begin manipulating, analyzing and scrubbing that data in preparation for an ERP migration and the start of the review of the company in question.
Eases report distribution
One of the big challenges that comes up when you’re going through an acquisition – and this applies at almost every stage – is that the acquisition team will have a lot of reporting needs in wide-ranging areas of the business. They might need sales reports, inventory reports, account receivable ledgers, financial statements and so on.
The difficulty is that the number of people needing the information almost always outnumbers the one or two people that are able to produce, format and distribute the reporting. Phocas eliminates this problem. One Phocas power user can produce and distribute all the reporting needed by the broader team very quickly and very easily. Or, alternately, the users who need the reports can themselves quickly learn how to use Phocas and start doing their own data analysis.
At some point during an acquisition, usually after the letter of intent is signed, the acquiring company will receive more detailed information about the business being sold and will need to verify that everything is as it should be. During this due diligence, one of the key objectives is to identify areas of significant risk, especially those that might affect the purchase price via either the multiple being paid or the EBITDA being reported. A big risk area is over-concentration. If a small handful of customers, or perhaps even just one sales rep, contributes disproportionally to your overall sales or profit, that is definitely something you want to know about going into the acquisition.
For more information, review this on-demand webinar, Mastering mergers and acquisitions with data analytics.