Whilst the business landscape struggles with uncertainty, it is no surprise that merger and acquisition activity has decreased significantly since the start of the Covid-19 outbreak.
Recent months have seen businesses hesitant and leaning towards cash conservatism, as they entrench and protect their assets, cautious about making drastic changes while the situation plays out. Consultancy firm Accenture noted that deal volume in the first quarter of 2020 dropped to a seven-year low, and that was even before lockdown brought many industries to a standstill.
Yet from within the uncertainty, a period of recovery is underway, and a new trend is emerging: economists and analysts are now anticipating a growing rate of M&As, with deal premiums likely to be reduced and previously unavailable assets coming on to the market. In a fractured marketplace, some companies have taken stock of their assets and will look to M&As to gain competitive advantage. On the other hand, some companies will prove to be unable to survive without external capital, and takeovers will rise. M&As can be a vessel for growth, but, in a down market, also a means of survival.
Enterprises who turn to M&A will have opportunities to grow, expand and modernize - but to achieve that, they must be able to overcome the hurdles that have traditionally held back or affected the M&A process.
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M&A: an opportunity to boost tech stacks
With remote workforces and increasing dependency on cloud architectures, the transition to digital has been granted a never-before-seen jumpstart. Businesses today need to leverage new technologies and partnerships to gain greater access to customers and keep providing excellent experiences to employees and users alike.
Large companies, such as Microsoft with its acquisition of IoT security outfit CyberX, will invest in improving their operational resilience, turning to M&As to expand their go-to-market and gain new tools and capabilities. Another new acquisition rumored to be carried out by the Washington tech giant could be TikTok, with this potential purchase changing its wider offering and bringing it in front of new audiences. There is an opportunity out there for forward-thinking companies to do what they have previously been unable to do, boost their resilience and go after new markets.
Managing the M&A integration process
With M&A processes, enterprises gain access to different products, new markets, new R&D teams and practices whilst also gaining access to previously unavailable technology. The key to making this a smooth change across the whole company is prioritizing the creation of a unified tech stack and a unified workforce. This will be what determines the success of the transaction.
The most successful M&A investments result in a new organization that works effectively as a singular entity from day one. This is a challenge that many fail to overcome, as legislation often limit companies’ opportunity to coordinate activities or share information conducive to uniting the systems before an M&A deal closes.
What this means is that preparation needs to go into ensuring optimized unity as soon as the newly formed business or business unit is created. Day one needs to be about quickly connecting essential business applications and merging essential operational data to help the transformed organization work as effectively as possible.
So what are the best steps a merging or acquiring enterprise can take to ensure the process runs as smoothly as possible?
Lean on as-a-service models
Any company in the merging process is one that will prioritize speed in setting up the new company model. If the process takes too long, the IT architecture will struggle to cope with different data sets and data pathways, with poor customer experiences and reduced operativity as a result which will harm the business in this delicate time.
If a company is looking to get up to speed quickly, it must embrace cloud applications that can deploy quickly and with minimal complexity. In the early stages of operations post-M&A, IT teams will need critical databases to be sorted and quickly made manageable, to prevent outages, facilitate accuracy, and prevent other maintenance issues. By deploying SaaS master data management applications in combination with connectors to the other cloud applications, data can be migrated quickly across the business network and users will be able to access the right data seamlessly and immediately.
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Prioritize uniting the architecture
When two different and separate architectures, comprising a variety of technology solutions and applications, are forced to merge and become one, a series of challenges is unavoidable. In M&A transactions, a collective solution built on united systems becomes critical to the success of the operation, and seamlessly uniting the architecture becomes a defining factor. Ultimately, this synergy comes down to successfully integrating data across the newly formed company, connecting essential business applications and ensuring the sharing of information is as smooth as possible.
Keep tight control of master data management
When it comes to data in the M&A process, the crucial role of creating a common language across the company cannot be understated. It is no use if customer data can be processed by one sales department but is then processed across different software for marketing. There needs to be a singular, transparent data policy that enables the master database to be shared and utilized across the complete ecosystem.
For this, the resulting company must prioritize the extraction and translation of this data to a single common language, controlled by a centralized data hub, to ensure data quality and a single source of truth.
What does the future hold for M&As?
Activity inevitably will rise as the business environment more clearly forms after Covid-19. However, enterprises need to be cautious to not rush the process, and emphasize the importance of ensuring unity after the transaction. By harnessing a cloud-first model that gives the newly formed company the control and flexibility it needs to unite the architectures, enterprises can ensure the systems are harmoniously merged, preventing outages and moving the company forwards towards its goals.
- IT at the heart of M&A success (opens in new tab)
Mike Kiersey, Principal Technologist, Boomi (opens in new tab)