Absoft: Data Migration – Solving the M&A Headache

In the current economic climate, mergers, acquisitions, and divestitures persist as strategic moves with a pressing demand for fast and effective data migration. When a segment of the business changes hands, the data migration process becomes more complex, particularly in cases of spinoffs or divestitures.

It is well known that traditional data migration methods can often pose risks, consume time, and can potentially derail deals. Don Valentine, commercial director at Absoft, the business building solutions provider, 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

So far, 2024 has seen subdued global deal volumes, average deal values have increased due to the return of mega deals, especially within the corporate sector. Alongside whole company acquisitions, high-profile deals involving divestments and spin-offs dominated headlines. Most mergers fail due to cultural clashes, geopolitical events, and, more importantly, operational integration challenges, even though they promise synergies, cost savings, and revenue increases.

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. To minimise IT costs while ensuring that the acquired operation continues to operate efficiently, it is important that individuals have access to data during the due diligence process.

Data alignment

Common data migration goals between both buyers and sellers are to favour expedited projects with minimal resource drain and timely deal closure. Indeed, completion of the IT integration will be part of the sales and purchase agreement (SPA) and delays could have market facing implications.

A company’s concerns over IT disruptions are understandable; employees do not want data quality checking exercises to distract them from their core operations and take their focus away from asset safety, production, or efficiency. The loss of vital systems can compromise asset safety, production and efficiency.

However, it’s obvious that differences in data 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. Questions such as; 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 as soon as possible to start the transition. It is essential to capture vital historic data, from stock movement to asset maintenance history. In order 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.

Additionally, the buyer will also be wary of side-lining key operations people by asking them to undertake testing, training and data assurance.

Both organisations share the same overarching goal, but underlying attitudes and needs can create friction that can delay the data assurance process, lead to an extension of the SPA, or even compromise the contract.

Migrating risks

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. In order to provide operational support for key functions such as supplier management, the buyer needed to create configuration and software to receive the data, transform the data, and migrate the data.

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. Inaccuracies and outdated systems are common in the merger and acquisition process, but are never discovered until after the acquisition has been completed, leaving the buyer’s IT team to deal and execute them, hopefully seamlessly.

Reliable migration

As part of the configuration, the extraction utility automatically downloads only the SAP table data related to the agreed key deal assets, removing any risk 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. Furthermore, because the buyer has early access to the transaction history, no extension of the SPA is required – but the seller is safe in the knowledge that only the relevant information regarding the transaction is made public to them.

Conclusion

Embracing a new approach to data migration not only safeguards data integrity and minimises downtime but also compresses the entire timescale. By reducing the due diligence process and migration process from nine months to three, the M&A SPA can be shortened, resulting in lower costs and increased confidence among buyers.

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.