Mergers & Acquisitions (M&A) are big opportunities for growth, expanding your market, and boosting profits. Buying another company can be exciting, but a successful merger needs careful planning and execution – especially when it comes to technology.
If you’re currently evaluating a potential acquisition or merger (either as the buyer or the one being acquired), understanding technology is critical. It’s not just about operations; tech is key to figuring out what a company is worth and making integration work after you buy them. If you ignore this aspect, you could overpay or face huge integration problems that could negatively impact the deal.
Whether you’re new to acquisitions or have done a few, making sure your technology plan supports your growth is essential. Let’s analyze some key considerations and best practices to make your next acquisition a complete success.
Scalability: Building for Future Growth
One main reason for M&A is to grow. Buying a company can quickly grow your customer base, product range, or bring in new talent. However, this growth can be held back if the technology you rely on can’t handle the demands of a bigger, more complex organization.
When you’re evaluating a company to buy, it’s important to look at how well their systems can grow. Ask yourself:
- Can their current systems handle more? Think about the future. Will their main systems (like ERP or CRM) slow down or begin to fail under the load of more transactions, users, and data?
- Is their tech modern and flexible? Older, on-premises systems might be reliable but difficult and costly to expand. Modern, cloud-based systems are often more flexible and easier to scale.
- What will it cost to scale up? Consider the immediate and ongoing costs of upgrading or replacing systems after buying the company. If a system needs a complete overhaul to grow, it can lower the real value of the purchase.
For Business Owners and Finance Executives: Scalability means future cost savings and more potential revenue. Technology that can easily grow means costs won’t increase significantly as the business grows, leading to faster and more profitable growth. It’s not just about the initial price, but the long-term return on investment.
For IT Staff: Checking scalability requires a deep look at the company’s system setup, infrastructure, and vendor relationships. Testing performance, reviewing capacity plans, and talking with their IT team are key to understanding true scalability.
Data Quality: The Hidden Value in Company Worth
In today’s world, data quality isn’t just a trend; it’s a real asset that affects how much a company is worth. Good, reliable data is essential for making smart decisions, running efficiently, and ultimately, increasing business value.
Poor data quality can hide risks and make a company seem more valuable than it is. Good data quality, on the other hand, shows a well-run, transparent, and valuable business. Think about these data quality points:
- Accuracy and Completeness: How reliable is their data? Are there big gaps or errors? Wrong inventory data, incomplete customer info, or incorrect financial reports can hide problems and give a false picture of the business.
- Data Management: Does the company have good processes for managing data, ensuring quality, and keeping it secure? Good data management shows they care about data and are well-organized.
- Accessibility and Usefulness: Is their data easy to get to and use? Data walled-in within separate applications (silos) and thus hard to analyze isn’t very helpful. Modern ERP systems centralize business data, making it easy to analyze, which is a big advantage.
For Business Owners and Finance Executives: Data quality is the basis for reliable financial forecasts, risk assessment, and tracking performance after a merger. Checking data quality upfront can prevent costly surprises and give a more realistic valuation. Bad data can lead to hidden problems and integration headaches.
For IT Staff: Checking data quality involves data audits, looking at data patterns, and understanding how the company manages data. Tools can help analyze data quality, but talking to data owners and users is also important to understand the real data situation.
Merger Integration Best Practices: Connecting the Tech
Once the deal is done, the real work of integration starts. Technology integration is often one of the toughest – and most underestimated – parts of M&A. Poor tech integration can disrupt operations, reduce productivity, and prevent you from getting the benefits you expected from the merger.
Here are key best practices for successful tech integration:
- Plan Early and Fully: Start planning integration well before the deal closes. Create an integration team with people from IT, finance, operations, and leadership from both companies. Develop a detailed plan with timelines, responsibilities, and key steps.
- Standardize and Simplify: Identify main systems (ERP, CRM, HR, etc.) and decide on the future system setup. Aim to use one main platform where possible. Simplifying systems reduces complexity, streamlines processes, and saves money on maintenance in the long term. For example, if you use Acumatica and the company you’re buying uses Dynamics GP, consider moving them to Acumatica for a single system.
- Data Migration is Key: Develop a solid plan for moving data early on. This includes cleaning, changing, and checking data. Understand how data will move between systems and invest in the right tools and expertise. Moving data is often more complex and time-consuming than expected, so plan and resource accordingly.
- Align Business Processes Too: Tech integration isn’t just about moving data and systems. It’s also about aligning how you do business. Use integration to improve and streamline processes across the combined company. Standardize workflows and cut out unnecessary steps to be more efficient.
- Manage Change and Communicate: Integration brings big changes for employees. Proactively manage change and communicate clearly to ease concerns, get people on board, and ensure a smooth transition to new systems and processes. Provide good training and support for the new integrated platform.
- Integrate in Stages: Consider a phased approach, especially for complex systems. Start with critical systems and processes, and then gradually add other parts. Integrating step-by-step allows for adjustments and reduces the risk of major problems.
- Keep Monitoring and Improving: After integration, keep watching system performance, data quality, and how well people are using the systems. Identify areas for improvement to ensure the integrated tech setup continues to support the combined company’s goals.
Technology – The Foundation of M&A Success
Technology isn’t just a supporting part of M&A anymore; it’s central to figuring out value and making integration work. By planning for growth potential, carefully checking data quality, and planning integration well, you can greatly improve your chances of a successful merger that delivers on its promises.
If you’re looking to build on a platform for future growth, or if you want to set up your business so that it can be easily acquired in the future, consider Acumatica or Dynamics 365 Business Central as your next cloud-based ERP.
Contact us at CAL Business Solutions today, and let’s talk about the system that’s right for you.
By CAL Business Solutions Inc., Connecticut Acumatica & Microsoft Dynamics GP / 365 BC Partner, www.calszone.com
