In today’s volatile business environment, change is the norm and organizations need the ability to adapt rapidly to changing business conditions, changing regulatory requirements, and changing organization structures – including the impact of mergers and acquisitions. One of the key benefits of today’s modern corporate performance management (CPM) software platforms is the agility they provide organizations to plan, forecast, and report through rapidly-changing business conditions. But another key benefit is the capability to model the impact of reorganizations, mergers, and acquisitions and to quickly integrate these changes without disrupting reporting and planning cycles.
M&A’s on the Uptick
Global merger and acquisition (M&A) activity has been picking up steam in recent years, with 2017 coming in as one of the most active years on record. According to a recent Harvard Law School article, total deal volume in 2017 reached $3.7 trillion globally (roughly equal to 2016, making it the fourth busiest year on record. Key drivers of this increasing M&A activity include:
- Low interest rates
- Increasing stock market performance
- Tax reform in the US
- Appetite for digital technologies
- Shareholder activism
According to a recent M&A trends report by Deloitte, M&A activity is expected to continue at high levels in 2018 and beyond. The factors cited above, combined with increasing corporate cash levels, will continue to drive high M&A activity in corporations as well as in private equity companies.
The Deloitte report goes on to cite that companies and private equity firms appear to be getting better at achieving their goals for their deals. Deloitte’s surveys consistently show that well-planned, carefully-executed integrations yield transaction success.
The report states “More than 6 in 10 respondents (63 percent) say they now incorporate the use of non-spreadsheet-based M&A technology tools as part of their deal processes. The respondents cite a raft of benefits. These analytical tools make post-deal integration smoother and faster, reduce costs and conflict, and shorten the time it takes to complete them.”
CPM Software Critical in Supporting M&As
As the Deloitte report cited above indicates, having the right tools in place to support M&A activity are critical to successful M&A integration. Using spreadsheets to integrate the financials of acquired companies, and analyze the impact of acquisitions takes too much time and effort and is prone to errors. In fact, Deloitte reported that those who have not used M&A technology tools yet would like to do so going forward: “Sixty-two percent of those who still rely on spreadsheets want to tap into these new M&A tools to integrate their acquisitions faster and more smoothly and to reduce costs and conflicts.”
CPM software provides many capabilities that make it essential to planning and executing successful M&As and reorganizations. Here are a few examples:
M&A Modeling – planning and forecasting the financial impact of M&As on consolidated financial results, including factoring in cost synergies and impact on corporate taxes.
Planning Reorganizations – changing legal entity structures to simulate the impact on financials is not something that’s wise to do in a General Ledger (GL). Modern CPM solutions support the creation of multiple hierarchies and the ability to create “what if” scenarios based on potential reorganizations.
M&A Integration – integrating new companies, collecting data from new GL/ERP systems, mapping disparate charts of accounts, and generating consolidated financial results for internal and external reporting.
Ongoing Performance Monitoring – post-M&A tracking of financial and operational performance and key performance indicators (KPIs), and making mid-course corrections is critical to realizing expected synergies and maximizing the return from M&As.
Real-World Customer Examples
Several customers using OneStream’s SmartCPMTM platform have cited M&A support as a key benefit of implementing the solution.
TEAM Inc. – implemented OneStream for financial consolidation, reporting, budgeting, forecasting and account reconciliations, replacing their GL and spreadsheet-based approach to integrating acquisitions.
Cleaver-Brooks – selected and implemented OneStream for unified budgeting, planning, and reporting. In additional to streamlining these processes, it made M&A integration much easier and faster.
To learn more, visit the customer testimonials page on our web site. And contact OneStream if your organization needs a better solution for planning and executing successful M&As.
John O’Rourke is Vice President of Product Marketing at OneStream Software. With a background in accounting and finance, John has over 30 years of experience in the software industry, including 20 years of experience in product marketing at Hyperion Solutions, Oracle and Host Analytics. He has worked with many customers and partners on financial reporting and planning initiatives and has spoken and written on many topics in corporate performance management. John has also held positions in strategic marketing and product marketing at Dun & Bradstreet Software, Kenan Systems and Decisyon.
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