Integrating Acquisitions | More than just a consolidation exercise!

A blog focusing on mergers and acquisitions (M&A) may not seem to be topical in the context of the current economic malaise. However, the recent flurry of M&A activity shows that companies that have weathered the storm may have stronger balance sheets and be in a position to take advantage of market sentiment and acquire underperforming targets.

Once an M&A transaction completes all post-merger integration projects have one thing in common: a shortage of time! At best, the financial controller has 3 months to: align accounting policies and processes; create a data repository; and implement a short-term consolidation solution, all before the first quarterly return.

Most acquiring companies are of sufficient size and complexity to already have a consolidation tool sitting on top of their general ledger. The standard approach is to map the acquired company to the existing consolidation instance of the acquirer. The key challenges to this approach include the following:

1) How to physically manage these mappings, which can easily run to more than 200,000 data points? This is way too large to store in a spread sheet or to review and manage in a relational database.

2) How to ensure the accuracy and completeness of the mapping? Given that:

(a) the process of mapping is very time pressured;
(b) the source and target may use very different structures; and
(c) source and target are both moving!

In parallel to this immediate requirement, the post-merger integration team will also need to decide on the end state of the ERP (Enterprise Resource Planning) and management reporting. There are broadly 2 approaches: go for an immediate ERP conversion, or run the 2 ERP’s in parallel. There are distinct advantages to both approaches which I can go into in another blog. What is relevant to this blog, is that both require a robust and efficient solution to manage the account mappings.

To summarise, to optimally manage mappings during post-merger integration requires the following two key considerations:

(A) Requires a specialist masterdata tool to ensure the mapping process is efficient, accurate, complete, flexible and robust; and

(B) Is not just a tactical objective. Although the mappings are required for the short term financial consolidation, management reporting and ERP conversion, they will also be required when eventually you understand the strategic direction of your financial applications.

Experience with our clients has shown that using a combination of Oracle Hyperion Data Relationship Management (DRM) and Oracle Hyperion Essbase delivers rapid benefits in a highly controlled, robust and flexible environment. If you would like to learn more please get in contact.

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