Mergers and acquisitions (M&A) are once again on the rise, forcing corporate executives and managers to face time-consuming due diligence in order to plan for continuity of operations during the merger. These same management members would benefit greatly from the indisputable value that an Enterprise Architecture (EA) approach can bring to this due diligence process.
While not immediately obvious, utilizing a tailored and incremental approach to EA can add significant value to an M&A due diligence effort. Organizations can gain a better and faster understanding of the relationships and dependencies within the targeted organization as well as identify risk exposure that a traditional due diligence process wouldn't deliver. This significantly improves decision making.
Driven primarily by page after page of one-dimensional checklists, the traditional M&A due diligence process is conducted in a narrow and non-relational framework. On the other hand, an EA approach brings a comprehensive and dimensional depth to due diligence. It enables a visually integrated representation and analysis of the business processes, technologies, and functional procedures for both the acquiring company and the one to be acquired. As a result, decision makers are more aware of the synergies, redundancies, existing compliance controls, and gaps between the two organizations and can quickly develop plans for effectively merging the two into one.
The key to success is ensuring the EA approach is an agile one. Most long-term EA methodologies rightfully require a complete modeling of an organization's entire technology and network infrastructure. But, an EA approach to due diligence in an M&A context analyzes the business activities, workforce and functional intensities, and related technology dependencies only within the overlapping areas of the two businesses. In other words, it provides better information - where it's needed - faster.
For example, recognizing that its treasury business and technology operations are extremely complex and needed to be documented and measured, a Fortune 100 client asked CherryRoad to develop an EA model for that business unit. Then later, as they began the process of acquiring another Fortune 100 company, they asked us to quickly develop an EA model of the target company's equally complex treasury operations so that the merged business activities could be built. Because the client had the business savvy to have an "as-is" model already in place, we were able to efficiently help them create a well-designed "to-be" model of Day 1 merged operations.
Just the bank reconciliation functions - only one component of this multi-faceted analysis - encompassed dozens of bank accounts worth hundreds of millions of dollars across many financial institutions that had to be reconciled back to internal accounts. In addition, the two companies utilized different accounting practices and were each on different technology platforms with custom interfaces. With these complexities, a traditional due diligence analysis of the business and technology relationships would have been much more arduous and prone to oversights as compared to one which utilized an agile EA framework.
In summary, a flexible and focused EA approach to M&A due diligence will ensure that all processes, technology, and functions of the combined entity are effectively designed, planned, and documented. Once everything flows together from a "blueprint" perspective, the plan can be put into action. Then the technologists can build and test the interfaces so that Day 1 operations go smoothly - without any ugly surprises.
If you'd like to learn more about CherryRoad's nimble EA approach to M&A due diligence, email us at info@cherryroad.com.