Why accelerating your digital transformation could pay dividends - Financial Advisory blog | Deloitte Australia has been saved
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We interviewed Australian corporate heads of M&A and identified key trends influencing deal activity and the expected impact of COVID-19 to their business in 2020. You can download our full The deal in focus report for data findings from our interviews and actionable insights from our M&A leaders.
Below, we share the highlights from our theme, Transform while transacting.
Key benefits of digital transformation
Transform while transacting for reduced risks, costs and speedier synergies
Transactions present multiple technology challenges. The transition and integration of an acquired company’s IT and digital platforms with M&A potentially alters an organisation’s DNA resulting in an outlook that is not fit for purpose. Therefore, strategic decisions around end-state technology solutions to support a rapid turnaround need to be made early.
Traditionally, companies facing M&A focus first on company integration, then, in some cases, on transforming the acquired company’s IT and digital platforms, usually with a multi-year staggered transformation program with phased synergy and business benefit realisation.
But we increasingly recommend companies tackle both at once to ‘transform while transacting’, with a flexible cloud-based solution across front, middle, and back office.
This approach can be deployed more rapidly and accelerate synergy delivery, reduce transaction risk and significantly reduce transaction costs by shortening timelines for transitional services arrangements.
Developing scenarios that show how bringing the transformational work forward will mean spending less money for the best outcome helps clients assess whether to accelerate a transformation during their transaction.
Another strategic approach we’re seeing corporates take is a ‘roll-up’ technique, where they acquire several companies specifically for their IT and operational digital platforms and transforming while transacting for immediate ‘best of breed’ technology. The roll-up technique can quickly build a corporate into a digital powerhouse giving it an immediate edge in the market.
For those on the sell-side, pitching quicker synergies and a reduced operating cost base through a transformation is a compelling differentiator and will increase the value of the divesting asset.
This is clearly highlighted in the current crisis with those who’ve already invested heavily in digital transformations and cloud-based solutions proving nimbler and faring better than those who haven’t.
The case for transforming while transacting
The costs of standing up a new digital platform or cloud-based solution can be higher up front than ‘lifting and shifting’ legacy systems, but there are increased synergies and they typically can be realised sooner, saving costs in the long run.
Contemporary digital platforms are more agile and create a leaner environment with less headcount and costs than a legacy system. Cloud-based systems don’t have infrastructure to manage, need less people to run them and are faster to implement. Migrating between cloud-based systems can also save time in long-duration activities such as data transformation, where less diverse data sets are simpler to coalesce.
When waiting is the right option
Accelerating a transformation usually leads to better outcomes and when backend systems such as HR and finance systems or customer-facing technology are mature, rapid integration is recommended.
Where we’re seeing less developed digital solutions is in operational technology. But it’s all down to the maturity of the buyer. A mature organisation with capability and operational focus could make it work.
Key challenges of transactions without transformation
Read the next blog in our M&A series on Deal making and opportunities for M&A to survive and thrive.
Or download our full The deal in focus report for data findings and insights from our interviews with ASX200 M&A leaders.
Kevin leads the Technology Strategy & Transformation practice in Australia and also the APAC Technology Lead Partner for Deloitte. He has over 23 years’ experience in the technology industry, focusing on the strategy and execution of innovative technology-enabled solutions. His experience spans across advisory and implementation of technology strategy and enterprise architecture, with a core focus on technology M&A due diligence and post-deal integration/separation. Kevin is a member of the Consulting Executive and a Deloitte Australia Board Member.