In the current economic climate, mergers, acquisitions, and divestitures persist as strategic moves with a pressing demand for fast and effective data migration. Every step in the process raises concerns, particularly in spin-off or divestiture scenarios where only a segment of the business changes hands, intensifying the complexity of data migration.

And, it is well known that traditional data migration methods can often pose risks, consume time, and can potentially derail deals. Don Valentine advocates for a different approach – one that mitigates risk, accelerates migration, and ensures rapid access to high-quality transaction level data…

Recording Breaking M&A Dynamics

While 2024 has so far seen subdued global deal volumes, average deal values have increased due to the return of mega deals, especially in the corporate sector. Alongside whole company acquisitions, high-profile deals involving divestments and spin-offs dominated headlines. Despite the promises of synergy, cost savings and revenue boosts, many mergers falter due to cultural clashes, geopolitical events, and critically, operational integration challenges.

Cost implications can be substantial, yet many companies often neglect the necessary data due diligence vital for M&A success. Proactively finding, storing and migrating critical data before, during, and after M&A activity is paramount to safeguarding objectives and ensuring business continuity. It is essential to ensure that individuals have access to data during the due diligence process, and that data is migrated to the core business in order to minimise IT costs while ensuring that the acquired operation continues to run smoothly.

Aligning Data Objectives

Both buyers and sellers share common data migration goals, and often favour expedited projects with minimal resource drain and timely deal closure.  Indeed, completion of the IT integration will be part of the Sales & Purchase Agreement (SPA) and delays could have market facing implications. It is understandable that companies are concerned about disruptions related to IT, especially any loss of vital systems that could compromise asset safety, production or efficiency; and employees do not want to be distracted by data quality checking exercises and take their focus away from core operations.

At the same time, however, there are differences in data needs that can create conflict. While the seller wants to get the deal done and move on to the next line in the corporate agenda, the process is not that simple. How can the buyer achieve the essential due diligence while meeting the seller’s need to safeguard non-deal related data, such as HR, financial history and sensitive commercial information? A seller’s CIO will not want the buying company’s IT staff in its network, despite acknowledging that the buyer needs to test the solution. Nor will there be any willingness to move the seller’s IT staff from core strategic activity to manage this process.

For the buyer it is vital to get access to systems. It is essential to capture vital historic data, from stock movement to asset maintenance history. To ensure effective operation after the transition, the CIO needs early access to the new system – any concerns about data quality or system obsolescence should be addressed early on. The buyer is also wary of side-lining key operations people by asking them to undertake testing, training and data assurance.

Despite the overarching goal shared by both organisations, underlying differences in attitudes, needs, and expectations can create serious friction leading to delays in the data assurance process, later extensions of the SPA, or even the compromise of the contract itself.

The Risks of Migrating

Historically, data migration processes pre, during and post M&A activity have prioritised sellers’ needs. The seller provided an extract of the SAP system holding the data relevant to the agreed assets and shared that with the buyer. The buyer then had to create configuration and software to receive the data; then transform the data, and then migrate data to provide operational support for key functions such as supplier management.

This approach is fraught with risk. Not only is the buyer left blind to data issues until far too late, but the entire process is time consuming. Data loss, errors and mis-mapping are commonplace – yet only discovered far too late in the process, generally after the Merger or Acquisition has been completed, leaving the buyer’s IT team to wrestle with inaccuracy and system obsolescence.

De-risking Migration

Configuration is based on the agreed key deal assets, ensuring the extraction utility automatically undertakes SAP table downloads of only the data related to these assets – removing any risks associated with inappropriate data access.But in order to ensure the process is quicker and delivers better quality assurance, a different approach is urgently required. The key is to take the process into an independent location. Under agreement between buyer, seller and data migration expert, the seller provides the entire technical core which is then subjected to a dedicated extract utility.

The resultant SAP solution can be optimally configured as part of the process, which often results in a reduction in SAP footprint, with the attendant cost benefits. Critically, because the buyer gains early access to the transaction history, there is no need for extensions for the SPA – while the seller can be totally confident that only the relevant data pertaining to the deal is ever visible to the buyer.

Conclusion

Embracing a new approach to data migration not only safeguards data integrity and minimises downtime but also compresses the entire timescale. By condensing the due diligence process and migration processes from nine months to three, the M&A SPA can be significantly shorter, slashing associated costs and empowering buyers to pursue new strategic plans with confidence. The shift towards a collaborative and technology-driven approach to data migration is pivotal in navigating the complexities of M&A activity and realising the full potential of these strategic transactions.