Australian Mergers and Acquisitions (M&As) saw a record high in 2021, with the deals announced exceeding the average of the preceding five years. By comparison, 2022 appeared to be a slower year, but a survey by PwC found that 58% of CEOs were not planning to delay deals despite concerns over economic challenges.
For companies completing an M&A, addressing integration challenges must be high on the priority list. An M&A is more than acquiring customers and services; you also acquire the data and processes that support the business. Legacy systems or data silos likely already exist. If these remain unaddressed when merging, they could generate more problems that impact how the new business serves customers, delivers services or completes processes.
In M&A, I often see five data integration challenges arise. Have you accounted for these?
Selecting the right data platforms
Merging with a company also means merging with their software. Both companies may operate on different data systems with different infrastructure, formats, and processing capabilities. The acquiring organisation must account for all data platforms and decide what to keep and phase out.
Planning at this stage impacts future integration success. Bain and Company suggests that organisations can reduce 20% to 30% of IT costs by replacing current technology with cheaper alternatives; for example, replacing on-prem systems with SaaS. I encourage you to use M&A as an opportunity to reconsider your current platforms and potentially move to a new Software as a Service (SaaS) provider. The provider can complete the migration work, removing the burden of completing it yourself, and you might see improved ROI over time.
Managing legacy data platforms
Forty-six per cent of organisations worldwide have claimed that legacy technology and technical debt have hindered their strategy. Older systems often have compatibility problems with newer software, and outdated security on these platforms can present risks.
Migrating to SaaS platforms enhances data accessibility, bolsters security, and enables scalability. By moving to SaaS, teams can work more efficiently and avoid issues caused by legacy systems, such as silos, lack of security and limited scalability.
If one or both organisations have a deep-rooted legacy system, bringing this data to a modern system may initially seem difficult. However, with the right integration partner and strategic planning, the acquiring organisation can make this data accessible and even bring it onto modern platforms.
Merging both business’ data
Combining both business’ data is another key challenge. The acquiring company will need a comprehensive understanding of all data from both organisations. Without visibility, it becomes difficult to map the next steps and complete effective integration. Think of it like trying to finish a puzzle without a reference picture.
The data silos often become apparent after gaining visibility of both businesses’ data. It is common that over the years, a business acquires more software platforms to handle various functions but does not always integrate these with other systems.
For a single company, silos prevent visibility over operations and make it difficult to glean insights. For an acquiring company, data silos can stand in the way of the organisation fully capitalising on the M&A. So, the success of your M&A relies on how your organisation dismantles these silos.
It is worth noting that even if the businesses individually do not have internal data silos, the fact of being separate renders each entity a large silo in its own right. Merging these ‘giant silos’ requires a systematic approach, ensuring the combined data landscape is cohesive, unified, and primed for shared success.
Integrating data across platforms
The acquiring organisation must ensure data integration continues to develop, even after choosing platforms and merging both businesses’ data. It is important to note that while an M&A is a great opportunity to get data integration processes right, integration is an ongoing effort. Business processes are continually evolving as the market (or business needs) demand. When adding new platforms to the business, the acquiring company must consider how it fits into the current ecosystem.
Potential pitfalls include data loss, data mapping and integration timeline delays. It's essential to steer clear of point-to-point (bespoke) integrations to circumvent these challenges. It might seem easy at the time to integrate one platform with another as needed, but this can give way to more custom coding when adding systems. Instead, adopting a scalable and flexible integration approach can pave the way for a smoother, more efficient integration.
Implementing new data management practices
As an Australian organisation, you must comply with data privacy obligations under the Privacy Act 1988, the Notifiable Data Breaches scheme and other regulations relevant to your industry. Failing to adhere to these can result in penalties and potentially erode stakeholder trust.
During an M&A, the acquiring organisation has an excellent opportunity to refresh data management completely and I recommend using it. It is unlikely that both companies have identical policies and procedures. Use the M&A to review compliance requirements, consolidate processes and ensure systems properly secure business data. After establishing data governance policies, keep them updated with regular audits, monitoring and team training to minimise the impact of breaches or leaks.
Conclusion
When completing an M&A, the acquiring organisation must understand the data integration challenges and develop a strategy to address them. This process involves selecting appropriate platforms, understanding the data present, managing legacy systems and ensuring compliance with data security regulations. It's not just about combining data but ensuring its accessibility and usability after the merger.
Creative Folks can solve these data integration challenges
Do you have the right partner and software to handle data integration for your M&A? If you need support understanding your data, dismantling silos, and effectively integrating both businesses, Creative Folks can help.
We built our Integration Platform as a Service, SiPHON, to connect cloud and MarTech applications across your organisation. Our experts collaborate with you to understand your data and build a composable enterprise using SiPHON to meet your strategy, goals and initiatives. You can visit our SiPHON page to learn more about what we offer.
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