Mergers and acquisitions loves the cloud

Part of the #Tech @ the heart of M&A series on M&A technology topics

While conventional M&A dogma has counseled to "transition, then transform," emerging cloud-based Enterprise Resource Planning (ERP) technology affords executives new options to have their cake and eat it too. Cloud technology now gives executives the opportunity to simultaneously transform not only their cost structure but also their capabilities by replacing aging, capital-intensive technology with a more flexible, subscription-based operating model that can ramp up or down as business needs dictate, as well as accessing advanced cloud-based capabilities based upon best practice.

Mergers and acquisitions loves the cloud

Today’s competitive business environment is driving companies to focus on core strengths and most profitable activities. Executives are increasingly looking to divestiture as a method to shed underperforming or non-core assets.

Amidst the focus on separation, it is often impractical to develop all of the required infrastructure to support the new organization, and it is common to include Transition Service Agreements (TSA) in which the seller provides post-deal, operational services or support to the buyer for an interim period of time after the transaction closes. As TSAs often include severe financial penalties for not exiting the agreement prior to the agreed upon date, there can be considerable pressure on both sides to exit quickly and with minimal impact to the business. This can be challenging, however, if the TSA includes support services for a traditional, on-premises or hosted ERP system, due to the complexity involved with ERP system configuration.

Moving to a cloud-based ERP system may help turn a potential M&A deal breaker into a deal maker. Opting for a cloud ERP solution can be a practical, less costly alternative to traditional on-premises or hosted solutions and should appeal to both seller and buyer. Requiring no hardware and nominal configuration, a medium-sized company can often be operational on a cloud-based ERP in four-to-seven months and a large international firm in approximately twice that time—both typically faster than traditional on-premises solutions—thereby facilitating a faster exit from the TSA. Considering that a cloud ERP typically provides regular upgrades, the ability to scale users, easy adjustments to system functionality, state-of-the-art security, and increased system capability, it may offer the ultimate in flexibility during a post-deal transition.

About the #Tech @ the heart of M&A series

In a new series on the role of technology in M&A, #Tech @ the heart of M&A, Deloitte provides a comprehensive overview of M&A technology transformation based on helping clients with the essential steps—from cost management to contract separation through application elements of privacy protection and service delivery components of infrastructure. By providing the building blocks for a clearly articulated, defined, and institution-wide approach to M&A technology implementation, Deloitte clients can free up technology executives for the more important and highest value-add role they can play in the M&A transaction—driving the core technology strategy in tandem with revenue growth and cost-curve optimization.

Meet the authors

For more information on this topic, please contact:

​Asish Ramchandran, Deloitte Consulting LLP

Rick Aviles, Deloitte Consulting LLP

Chris McCormick, Deloitte Consulting LLP

Christian Saint-Onge, Deloitte Consulting LLP

David Zager, Deloitte Consulting LLP

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