Read this Executive Insight to learn the answers to the following questions: 1. How can you effectively grow your business through M&A?, 2. What challenges do you need to address?, 3. How can an integrated enterprise platform support the success of your M&A objectives?
Enabling Growth through
Mergers AND Acquisitions
SYNERGIES SUCCESSFULLY REALIZED
SAP Executive InsightPerpetual mergers and acquisitions (M&A) are becoming a way of life for growth companies. 2006 set a record for M&A activity in the United States, with deals totaling US$1.2 trillion in value, a 23% increase from 2005. Remarkably, the largest increase in activity did not come from the telecommunications or high-tech industries, but rather from chemicals, energy, and construction.
The historical track record of M&A transactions tells us they are highly risky. Academic research and a variety of other studies have estimated that 50%-80% of all deals fail to reach 1their projected results. Most mergers fail at the process and data integration levels rather than at the corporate level. An integrated enterprise business process platform can play a key role in supporting merger success by ensuring that processes are integrated and information is harmonized.
This SAP Executive Insight details the challenges and outlines the path to success of different M&A strategies. It addresses how to establish a solid foundation to achieve transaction objectives and enable an organization's growth strategy. Specifically, this paper answers the following key questions:. H ow can you effectively grow your business through M&A?. What challenges do you need to address?. H ow can an integrated enterprise platform support the success of your M&A objectives?
1. "Why Do So Many Mergers Fail?" Knowledge@Wharton, March 2005.
2 SAP Executive Insight - Enabling Growth Through Mergers and AcquisitionsEXECUTIVE AGENDA
At a Glance
M&A Objectives The Importance of IT Blueprint for Success
M&A objectives can be classified into Even the best M&A strategy means lit- Merger success depends on a multi-three categories. These objectives are tle without effective execution. IT can tude of issues. Nevertheless, few not mutually exclusive. In fact, their play a significant role in enabling post- mergers could meet or exceed their benefits and challenges are cumulative merger success by providing the build- objectives without sufficiently address-in most cases. ing blocks and framework necessary ing people, process, and IT...Acquire new markets. In this recent for flawless execution. ..Focus on process standardization. rise in M&A activity, market acquisi- ..Focus on speed. M&A transactions Standardized corporate processes tions prevail, including an increase in that integrate systems and processes catalyze postmerger integration and the number of cross-border deals, in sooner achieve higher rates of suc- value realization.which buyers are increasing their cess that translate into higher ..Standardize your IT platform. Out-physical global presence and access returns. These greater returns create dated IT systems and disparate land-to new customers. the potential for more acquisitions. scapes make it difficult to take full ..Cost reduction through synergies. ..Manage the risks. System controls advantage of the more extensive Increasing efficiencies by creating help maintain regulatory compliance resources brought together in an economies of scale is the key driver throughout the integration process. M&A transaction.in achieving this traditional M&A ..Realize the value. Companies can ..Focus on information harmoniza-objective. In particular, in highly frag- maximize the value of IT by establish- tion. Harmonizing product, customer, mented and mature industries, ing a single view of the business supplier, resource, and employee acquisitive strategies are often cost- across merged systems, and by information is the key to initiating focused. focusing on information harmoniza- integration...Obtain new products or technolo- tion and consistency to realize inter- ..Detail your capabilities. The most gies. These M&A deals focus on nal synergies. underappreciated assets in acquisi-complementing product lines or ..Maximize the value. Companies with tions are the people. HR systems acquiring technologies that provide integrated IT systems command more identify and leverage a company's companies with an advantage over money in M&A deals. Appropriate hidden knowledge and skills, drasti-their competitors. investments in IT pay on both sides cally reducing risk.of a transaction. ..Develop an M&A skill set. If you are ..Support the transition. Successful in perpetual ac... [download for more]
