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Mergers & Acquisitions: To Adapt or Adopt...

As your business expands via mergers or acquisitions (M&A) you will naturally look to bring your combined business into a single tenant to simplify and streamline how you run and report on the organisation as a whole.

The first strategic decision you will face is whether you should:

  • Adapt what you have in the existing tenant for the new additions;
  • Adopt your existing tenant framework and apply it directly to the new additions.

The most important consideration in deciding your approach is to understand what made this business combination attractive to start with. 

Understanding What Makes You Unique

Every organisation is unique in some way – that’s what makes you special, and the business that you are bringing into your tenant is no different – there is a reason for this M&A after all.

Understanding the points of uniqueness as well as similarity is the guide to where to Adapt and where to Adopt. As a general principle variation should be supported where it is complementary to the uniqueness within the business, but standardisation should be encouraged elsewhere.

Typically, although not exclusively, this applies to what you sell, how you sell it and who you sell it to. This is your unique selling point (USP) in the market and you will need to reflect this in the way that you configure your tenant for your organisation.

Key Considerations for Adapt or Adopt

Whilst every business combination is unique, there are a few areas that should always be considered:

  • Foundation Data Model (FDM) – The FDM will be shaped by reporting requirements – where they are the same, and where they are different. The FDM is at its most powerful when you follow the simple rule of one business dimension means one and only one thing. Write down the definition of what each dimension means in your existing tenant, and see where that overlaps with the organisation that you are bringing in. A new business will doubtless mean new values in some of your Worktag definitions, but also potentially the need to define new business dimensions around the new business. The key to success here is aligning the Worktag values across the organisations, and the definitions are what helps you do this successfully.
  • Job Architecture – How do the new employees fit within the existing job catalogue, job families, and grades? Unless the project includes effort to align these across the two organisations (in which case don’t forget the legal, comms and change efforts) there may well be no option but to supplement your job architecture with some additional values.
  • Legal & Regulatory Differences – whether your M&A takes you into new territories, or new business lines, these can both come with new compliance requirements to consider. Work out what these requirements are early and consider how you will weave the needs into your overall design. These can take many forms and impact different types of functionality, be they IR35, payment practices, tax, local GAAP and statutory chart of accounts
  • Policy Framework – You will rely on your policies to design many processes throughout your system, so identifying where you can move to a single governing policy and where you need to keep variations will illuminate the design process. Whilst different countries may have slightly different requirements, it is still possible to unite them under a common framework with some accepted local variations.
  • Business Process Framework – Your business process framework defines how transactions move through the systems and who approves them. Whilst it is perfectly possible to have distinct business processes for the existing and new organisations, this will add complexity to testing, troubleshooting and ongoing maintenance. Simplicity of design normally has a quick payback, so keep your business processes as streamlined as possible.
  • Security Framework – The security framework determines how people are assigned to tasks, but also what information they can see and act on. Again, starting with the definition of the purpose of each role will help you to understand where you can adopt the existing framework, but also where you must adapt it and why. Give specific consideration to any differences in data sensitivity when determining who can see what.
  • Reporting – New countries come with new reporting needs, a clear case of adapting by addition. Review the existing reports to see where they will naturally expand their scope to encompass additional organisations and undertake a fit / gap analysis to determine what is missing.
  • Governance & Maintenance – Combining multiple organisations into a single tenant is only half of the story. During the process the project will naturally provide some governance over the change management and alignment of everything listed above and more. What is the plan for the continued ownership and governance after go-live? This is your governance model and is at the heart of long-term success, it is how you control the former  organisations within the agreed adapt or adopt framework to ensure continued alignment and adherence to the agreed principles.

If you would like to learn more about navigating the mergers and acquisitions process from an technology standpoint, make sure to attend our upcoming webinar, Strategies for Integrating Systems in Mergers & Acquisitions, on Tuesday, May 11th at 4PM BST (11AM EDT ).