Deloitte (News - Alert) recently published its fourth edition of a report titled “Manufacturing and Industrials M&A Predictions.” In this edition, Deloitte examined the trends over an 18 month period with results showing that appetite for M&A, or mergers and acquisitions, in all sectors in 2014 appeared robust at a global level. As Deloitte’s recent M&A Index revealed, more than $2.5 trillion worth of M&A deals globally were announced, representing a 30 percent increase on $1.9 trillion for the whole of 2013.
Now that we know that M&A in manufacturing is being looked at as a strategy, what do these companies have to do in order to make it a successful one? According to Eric Stout, who is vice president of the consulting - manufacturing vertical at BackOffice Associates, he believes that manufacturers need to take the right steps in order to ensure proper quality and migration for all enterprise data involved.
Stout feels that manufacturing companies should take note of several data lessons recently learned. He has come up with what he believes are the three top data lessons, which break down as follows:
First, evaluate the information management maturity to ensure proper measures/procedures are in place for bringing the M&A business case to fruition.
Next, dig into data involved in the M&A transaction to confirm relevancy, consistency and proper alignment with business processes. Enterprise data must support the reasoning for buying a business.
Finally, regardless of whether going through an ERP consolidation or looking to improve data across a current set of systems, establish consistent data standards with common and repeatable business processes and governance measures across the organization.
If a manufacturing company is looking to be acquired it has to show that the transaction is going to be a viable one. This means that most of the focus is going to be placed on the financial health and growth ratio of the prospective acquired company. Data becomes a very important factor in that once a company is swallowed up the data has to also be absorbed.
Once the acquisition has occurred, the acquired company’s data needs to be migrated efficiently and more importantly, economically into the acquiring company’s data base. If the two systems lack standardized data standards across the systems and functional areas, this will result in significant data quality and interoperability issues. What should have been a quick conversion becomes a costly and time-consuming process.
The second lesson shows that the company needs to have business-ready data. In many cases, all of the information is not always needed. In fact, recent research analysis shows that less than 50 percent of business data is relevant. The goal is to have a database that does not have duplicate, out-of-date, or even worse, incorrect data.
Regardless of whether the acquiring company is looking for the information to be migrated or deploy a new ERP system, useless, redundant data can bring on the fear of being overwhelmed by the data’s volume. Again, a lot of time and money will be wasted on trying to figure out what is actually useful data.
One of the best ways to achieve a successful business model is to establish common and repeatable business processes. Stout believes that at the highest level of information maturity, M&A activity has a well-defined, targeted set of standards and processes. Being able to use standard training methods for new hires or employees migrating to new roles will go a long way in ensuring consistency of data standards and minimal data errors. Information governance drives this accountability from all levels of the manufacturing organization.
Stout’s view is that “Closely examining an organization’s data before a major financial initiative, developing the data business case, establishing proper data management standards through relevancy and consistency practices, and employing an information governance program provides a predictable means to saving a manufacturer millions in data integration costs and helps to alleviate SOX compliance concerns in the long-term.”