MDM and M&A

A lot of our new clients have asked us to build MDM business cases to support their merger and acquisition strategies. Specifically, they’re looking to support the following four activities:

• Recent corporate mergers
• Acquisitions
• Reorganizations
• Spin-offs

Collectively, these activities can roll up into a category called corporate restructuring. Contrary to popular belief, restructuring isn’t just a financial challenge. It includes realignment of marketing activities (for instance, reconciling promotions and re-aligning diverse product sets), sales (reorganizing territories and compensation plans), and operational issues (company locations, product inventories).

Most companies approach restructuring as a one-time-only activity in which an army of analysts tries to reconcile financial structures from organizational hierarchies, to budgets, to the accounts themselves. The fact is these activities aren’t just part of high-profile M&A events. They occur every year as companies go through their annual budget processes. During a corporate restructuring the process usually takes longer than the acquisition itself.

Three principle MDM features lend themselves to this restructuring work: matching, grouping, and linking. MDM excels at matching “like” items from disparate sources, tracking and managing hierarchies and groupings, and linking disparate data sources to enable ongoing data integration. The point is that the act of merging organizations also means consolidating details across the companies. Most people consider this a one-time-only activity. The fact is, it must be an ongoing process.

When one company buys another, it’s typical to allow the acquired company to continue to operate using the same systems and methods it always has. The acquiring company simply needs to know how to integrate the information into their existing business. Consider Berkshire Hathaway. They acquire companies frequently, but don’t change how they run their business. They simply know how to reconcile and roll up the details.

Ideally, corporate restructuring means establishing a process to allow organizations to continue their operations using their existing systems. IT systems reconciliation simply cannot get in the way of running business operations. All too often, the answer is, “Replace their systems with ours.” This statement means that the new organization should reengineer its business. This simply takes too long.

MDM provides a company the capability to link the data content from disparate systems within and across companies. I’m not talking about linking Linux with Windows, I’m talking about matching and linking business content across dozens or even hundreds of systems. This way invoices continue going out, sales people continue getting commissions, and customers can still get product support in a seamless way. 

Next time you’re discussing corporate restructuring and someone says the word “re-platform,” ask the question, “If we can link and move the data to continue to support core business processes, then we wouldn’t have to disrupt our operational systems, right?” Matching and linking the data across core systems can save a lot in terms of software and labor costs. But improving it where it lays? Priceless.

Comments

[Evan Levy]

Hello Evan,

Are you seeing a lot of companies looking for an MDM solution to assist with M&A?

Regards,

-Norm Warren

Norm,

Thanks for noticing the typo…

Yes, we’re seeing companies leverage mdm technologies for corporate restructuring activities. Most folks think about MDM as a means to do the up-front legwork of putting the numbers together; however, the real benefit is with the after the fact activities. M&A activities are driven by numerous issues and initiatives; engineering an operational integration solution prior to M&A isn’t likely. The value that MDM brings to the table is helping the resulting organizations integrate their information without having to bite off immediate systems replatforming and reengineering.

E.

[Jim Walker]

Evan,

Great post... this is dead on. There are so many M&A use cases for MDM and all can provide quick value.

I enjoyed the part that mentions M&A restructuring as an ongoing process. EVERY organization that has used our technology to help them with these issues consider this concept paramount to the success of the merger.

Further, they expect the technology to support this by accommodating a phased approach to integrating systems and data. To this end they start small and use a hybrid approach to MDM whenever possible.

They typically establish a system of enterprise wide identifiers so they can link records as you mention above. They then typically choose to persist whatever data makes sense in the hub. The most obvious for many is a central location for opt in/opt out preferences for their combined customer base.

Cheers,

Jim Walker
Initiate Systems

[Evan Levy]

Thanks for the comment, Jim. And--as you well know--identity resolution and match and link functionality is a cornerstone of this work. It bears mentioning because many of our clients don't necessarily map this approach (and the necessary functionality) to an M&A or corporate reorganization business case. And they should given that most company's have some sort of reorganization at least once each year.
Thanks for the comment.

Evan

[Ron Dimon]

Good insight and clear use-cases of MDM in M&A (and D) and Re-orgs Evan, thanks.

I would also add that MDM has a place in the "pre-sales" (or near the end of due diligence) phase of M&A: helping structure the merger or acquisition deal itself by running a series of alternate hierarchy scenarios: what if we group these COGS accounts as SG&A and out-source production? what if we leverage more debt in this deal and re-class these assets as part of it? what additional synergies can we claim if we group shared services into overhead, etc., etc.

I think if companies (and consultancies and investment bankers) got more MDM savvy (and more strategic finance tool savvy), they could run dozens of scenarios in a fraction of the time it takes them now and get better insight and make better decisions.

Best,
Ron
http://www.business-foundation.com

[evan levy]

Ron,

Thanks for the post. I absolutely agree that the inclusion of MDM can provide enormous benefit in preparing and structuring data to support more sophisticated analytics. Clearly the challenge will be determining what information is open to sharing during a due diligence process.

E.