M&A Challenges – An MDM Perspective
Companies that spearhead a merger or acquisition usually have one overriding goal in mind: to become a bigger and (hopefully) better entity. But the people involved don’t always see past the actual M&A transaction and all the intricacies it will bring. One of the issues that deserves more attention is how they will combine, manage, and make sense of both organizations’ data when they come together.
Some do. We occasionally get questions from companies looking to combine with another that specifically want our expertise in material master data management. In most cases, however, it’s an afterthought, and that’s why tales of messy and slow M&A integrations are fairly commonplace.
Consider the roadblocks that most organizations face in a typical M&A scenario:
1. Problematic ERP consolidation – While most companies of a decent size now use ERP systems, it is exceedingly rare to find two that are using the same exact version. Even if they’ve gone with the same vendor and bought theirs around the same time, there’s usually customization and add-ons involved. Very likely the combining companies’ complex systems and how they were implemented are poles apart. This tends to complicate things when two organizations try to make multiple incompatible systems work together.
2. A lengthy data migration process – An M&A integration necessitates the transfer of huge amounts of data from one system to another. These systems might not be compatible and probably won’t be able to “talk” to each other right away. Delays and longer project timelines are sure to follow, as are lower realized ROI and unmet project goals.
3. Confusion over compliance – Ticking all the boxes on a compliance checklist is tricky, even on a good day. With two companies coming together with variations in size, industry, geography, and regulatory oversight, this activity can easily become a morass of conflicting directions and requirements. For the new entity to quickly become competitive in the market, compliance guidelines need to be followed up-front and any confusion needs to be resolved.
M&A transitions are complicated. There’s no way around that fact. But by focusing on how the new entity will be able to handle the combined companies’ processes, data and governance, the more challenging issues can be overcome. We’ll explain the role an effective master data management solution can play in our next blog post.
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