Leveraging ERP for Corporate Growth (Part 3)
Growth through Mergers and Acquisitions. Many companies prefer to take shortcuts to organic growth and opt to acquire or merge with another business. M&A is often considered the fastest way to reach new markets, use scale to reduce cost structures, and obtain new products and technologies quickly. Around the globe, M&A activity continues to increase significantly each year. In fact, many companies are founded and funded each year based on their ability to identify likely acquiring companies. For the acquiring company, the challenge is to genuinely integrate the acquiree into parent operations, and to fully leverage their strengths and synergies.
Challenges: Despite the promise of a fast path to scale, an M&A strategy is highly risky. Academic research puts the failure rate at reaching M&A objectives at 50%– 80%. Each main objective for an acquisition carries significant execution risks, such as:
Acquiring new markets. There can be a structural inability to cross- or up-sell due to ineffective consolidation and integration of internal sales and marketing functions and sales channels
Reducing cost through synergies. There can be aninability to identify potential areas of savings due to decentralized and duplicate information.
Obtaining new technologies. Inadequate product-integration processes can reduce the potential benefits of offering acquired technologies in one package with existing solutions.
Addressing these Challenges: There is no sure-fire way to ensure that an acquisition pays off. Too many cultural and market issues can prevent successful execution. Nevertheless, leading companies that routinely acquire other businesses leverage their ERP systems to help achieve anticipated benefits:
Focus on process standardization to catalyze post merger integration and value realization;
Implement an enterprise process platform to replace outdated IT systems and disparate landscapes that make it difficult to leverage fully the extensive resources brought together in the M&A transaction;
Focus on information harmonization to ensure visibility into product, customer, supplier, resource, and employee information;
Leverage hr capabilities and reduce risk through hr systems capable of capturing a company’s hidden knowledge and skills.
Growth through acquisition requires developing an M&A skill set by implementing a cross-functional team (IT and business) that develops and deploys a standardized approach for integrating acquired businesses.
Traditional back-office functions, such as HR or Accounting/Finance, play an increasingly important role in funding growth. ERP helps to implement shared services, meaning critical HR resources can be freed up to focus on talent management and innovation. As your enterprise grows, ERP helps you consolidate your application portfolio to establish standardized processes and to aggregate disparate information sources to allow for speedy analysis and reporting in today’s market.