How Cloud ERP Helps Finance Teams Navigate the M&A Process

Four key ways finance teams can leverage cloud ERP to ensure successful mergers and acquisitions scenarios

Interview with Stephen Wolff, Managing Partner & Solution Architect at Myers-Holum

The number of mergers and acquisitions (M&A) spiked in 2021 as organizations and investors looked for new ways to manage the impacts of the ongoing global pandemic and plan for the future. Globally, M&A achieved new milestones during the first nine months of 2021 when it reached $4.33 trillion, breaking the previous record of $4.1 trillion (for the same period in 2020).

Looking forward, more than 80% of executives say they expect valuations to rise further in their industries in 2022. More than a third of executives expect valuations to climb by at least 10% in 2022.

“Global mergers and acquisitions hit new record highs in the third quarter as companies and investors shaped their post-COVID future through transformative deals,” Reuters reports, “while their advisers struggled to cope with transaction volumes never seen before.”

The companies involved in these transactions face a host of different challenges once M&A deals are set in motion. When two merging entities have been running on different financial systems, for instance, there’s a potential lack of integration between those firms. Companies also have to manage different compliance and security-related issues, both of which require specific actions to ensure a smooth transaction.

By understanding these and other challenges up front and by addressing them early, the odds of a successful M&A scenario can increase significantly. “We’ve seen that M&A is risky business," said Stephen Wolff, Managing Partner & Solution Architect at Myers-Holum, a NetSuite Alliance Partner, “that can present various complexities and difficulties.”

Ways ERP Supports Successful M&A

Whether it's a rollup of small entities into a larger organization, a large enterprise divesting or carving out one department and selling it to a private equity (PE) firm or a middle-market company acquiring a company of similar size, M&A success rates are often tied to corporate culture, business processes and technology. When processes are standardized and technology stacks unified, key performance indicators (KPIs) can be used to maintain business continuity during the first 100 days.

“This sets the stage for successful outcomes down the road,” said Wolff, who sees ERP playing a critical role in M&A for these four reasons:

1. Enables a thorough due diligence process. When implementing a new ERP or merging a company onto an existing system, the NetSuite partner asks questions like: How will the new chart of accounts be structured? What’s the new finance and accounting headcount? Have you identified opportunities to merge existing processes? How will key reporting be produced both on day one and then 100 days after the transaction?

   “Many companies will tack on their business integration activities and planning to our future state design process for ERP,” Wolff explained, “because ERP is so widely encompassing of business processes and operations, a lot of answers are provided with the system definition and the system architecture.”

2. Aligns the businesses with the technology. For optimal success, business integration activities must be executed in tandem with system integration activities.

   “As we implement a new ERP, we use it as an opportunity to merge the businesses together from a business process standpoint,” Wolff pointed out, “and pull the entities together into the same room to talk through and enumerate their processes.” Myers-Holum also knows where NetSuite fits into the equation because the partner has already completed the preliminary planning and requirements-gathering work. This helps it better align the businesses themselves with the technology and supports a successful M&A outcome.

3. Puts finance teams in the driver’s seat. Finance teams are uniquely positioned to drive the success of business integrations and should drive the key, integration-related decision making. Using ERP to focus on the “boots on the ground” operational, processes and efficiencies helps ensure a successful M&A scenario for companies of any size and across all industries.
4. Drives efficiencies across business integration, people and processes. Before the M&A transaction takes place, companies should do IT and systems road mapping. Most of the companies Myers-Holum has worked with generally understand which systems will be retained in the new entity, which might be expanded and which will no longer be used.

   “They also ensure that the related vendors are engaged on the right timeline,” said Wolff. “As we’re planning out the business integration, we can gather a lot of knowledge from consolidating the business technology. This helps us derive business integration and people/process efficiencies.”

An ERP implementation can serve as a strong anchor for business integration activities. During a Myers-Holum implementation including multiple integrations, process gaps and hidden issues are often discovered.

With a unified ERP system in place, finance teams have the tools necessary to help them navigate the complex M&A process. By helping organizations fully leverage the NetSuite framework, Myers-Holum gives those entities the power to drive optimal business integration outcomes, overcome M&A hurdles and plan for the future.

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