While mergers and acquisitions consistently create buzz, the reality is that more than half of all deals fail to create shareholder value. In a recent study by Boston Consulting Group (BCG), only 47 percent of all M&A activity produced a positive shareholder return one year later. Many factors go into the success or failure of an acquisition, such as cultural fit, market demand, and how comprehensive the due diligence process is. However, IT is one area that can make a positive and significant contribution to the bottom line during the M&A process. Specifically, enterprise performance management (EPM) platforms.
As a refresher, Gartner defines EPM as “the process of monitoring performance across the enterprise with the goal of improving business performance. An EPM system integrates and analyzes data from many sources, including, but not limited to e-commerce systems, front-office and back-office applications, data warehouses and external data sources. Advanced EPM systems can support many performance methodologies such as the balanced scorecard.”
In this slideshow, Host Analytics has outlined five ways EPM can help save costs throughout the M&A process.
Improving M&A Outcomes with EPM
Click through for five ways EPM can help save costs and accelerate M&A integration, as identified by Host Analytics.
Vetting and Due Diligence
Vetting an acquisition during the due diligence process. According to BCG, the average acquirer reviews approximately 20 candidates before acquiring a company. Using EPM, the acquirer can build models across different lines of business (sales, marketing, services) that connect the potential acquisition to the larger corporate strategy. This way, they can determine in advance if the deal makes sense for the company, customers, and shareholders.
Analyzing Impact on Shareholder Value
Analyzing the short- and long-term impact of the acquisition on shareholder value. Most businesses expect to see returns within 12 to 36 months after the acquisition closes. With EPM, businesses can more accurately forecast when the ROI will kick in because they have a consolidated yet comprehensive view of performance across the company.
Accelerating the integration of business and financial processes. This includes integrating and consolidating data from existing and new systems; helping close the books faster; automating currency conversion for international business units; planning for headcount, budgeting and forecasting; and ensuring consistency in reporting.
Standardizing Post-Merger Integration
Standardizing an approach to post-merger integration. The BCG report also found that less than 40 percent of companies have a standardized approach to post-merger integration. Without repeatable processes, time and resources are squandered. But when you have a standardized approach, you’ll have repeatable processes to help the new company quickly come on board, while reducing reliance on IT. These processes help to reduce paperwork, identify potential trouble spots, and eliminate redundancies.
Reducing Costs and Improving Performance
Uncovering ways to reduce costs to improve the performance of the combined company, which is ultimately going to deliver faster value to shareholders. This includes monitoring and modeling the integration of functions, consolidation of resources, integrating existing IT systems and services, and determining the most cost-effective IT infrastructure (cloud, on-premises, hybrid) for the merged companies.
M&A is expensive and fraught with risk, but having the right technology platform in place helps companies stand a better chance at quickly returning value to shareholders.