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Mergers and Acquisitions Without Reviewing Technology Requirements Can Be a Serious Mistake
Business technology systems have become the central nervous system in today’s progressive business. They provide management access to information enabling them to understand the current business climate as well as make important decisions about the future. They provide employees the operational and day-to-day information necessary to efficiently provide products and services to customers in a timely manner. ERP and supporting technology systems touch every aspect of the modern business. From purchasing, inventory, and warehouse management to customer orders, production, shipping, and accounting, these all encompassing systems provide a centralized database containing important information to everyone in the organization who needs it. It puts information at people’s fingertips and provides one version of the truth throughout the organization. They enable a 360 degree view of the business and allow the management team to optimize efficiencies and gain a competitive advantage.
Given the value and importance of these business technology systems, few companies take the time to thoroughly evaluate and understand what they might inherit as a result of a merger or acquisition. ERP systems are very complicated because they touch every department and most business processes. The cost to replace or change an ERP system in terms of time, effort, and real dollars can cost six to seven figures for a mid-sized business and cause significant business disruption. It is therefore essential to perform proper due diligence prior to finalizing a merger or acquisition to clearly understand the state of the technology and financial impact it might have on establishing a valuation.
