Corporate transactions are not for the faint-hearted. Large sums of money are at stake and the parties involved face extreme time pressure. Any responsible buyer or private equity group wants to know what they will gain from an investment before signing a deal and enduring such a grueling process.
Many factors can muddy the waters and complicate decision making when evaluating a company or business unit to be bought or sold. The bigger and more international a company is, the more complex it becomes to cleanly extract or cohesively integrate its IT. Vertically integrated sub-companies, diverse subsidiaries and business units, and customers scattered around the globe are both assets and risks.
To get the green light for a merger, acquisition or divestment, a company’s value needs to be tangible for investors – and that value includes how quickly and efficiently it can function as an independent unit:
- In cases of M&As, the purchased company should be poised to integrate seamlessly into a buyer’s business and existing ERP.
- A divested company must be able to manage its core financial and business processes on its own.
IT Can Pose the Greatest Challenge…
Unfortunately, the reality usually looks somewhat different. Some businesses to be divested have no ERP software to begin with. Transparency is a challenge when they are still struggling to manage their organization using a mix of spreadsheets, off-the-shelf accounting software and various other applications. This complicates the due diligence process, and leaves the true value of the company unclear – a red flag for potential buyers.
Or if there is already an on-premises ERP system in place, it can prove difﬁcult to carve out from the system landscape. The alternative of simply setting up a divested company with entirely new software is not always ideal either. On-premises software is expensive to purchase and operate, and the cost and effort of updates and maintenance often fall on the business itself – another red flag.
…but the Cloud Makes It Simple.
There is another solution. Cloud-based ERPs such as SAP Business ByDesign make mergers, acquisitions and divestments faster, easier and more secure. The solutions are flexible and do not require hosting duties and data to be moved around from one data center to another. SAP Business ByDesign features a clean and intuitive interface, allowing employees to adopt the solution quickly with minimal disruption to core tasks. And the solution is fully integrable with a number of both SAP and non-SAP systems and applications – a business unit outfitted with SAP Business ByDesign will instantly be at home in any IT environment.
Businesses based on these scalable and flexible solutions in the cloud are more attractive for buyers and/or private equity firms, as they ensure a relatively seamless and cost-effective merger or carve-out process. What’s more, as cloud-based software requires virtually no IT resources, no big servers to support, no maintenance, and no upgrades, a private equity’s capital stays right where it belongs and can accumulate further value through strategic investments.
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