SAP White Paper

SAP for Industrial Machinery & Components

Madness?
Mergers, Acquisitions,
and Divestitures
CONTENT

^ 4 Executive Summary

^ 5 In the Name of Growth

5 Risky Business
5 A Common Path to Success

^ 7 Premerger Assessment Phase

7 The Role of IT
7 Gain the Insight You Need

^ 9 Postmerger Integration Phase

9 The Pitfalls of Postmerger
Integration
10 Bridging the Gaps

^11 Solutions for Mergers,

Acquisitions, and Divestitures
11 Solutions for the Premerger
Assessment Phase
11 Strategy Management
11 Business Planning and
Consolidation
12 Solutions for the Postmerger
Integration Phase
12 Identity Management
12 Resource and Portfolio
Management
13 Master-Data Management
14 Solutions for Building a Business
Process Platform
14 Building on an Integrated IT
Environment

^15 The Hallmarks of Successful

Mergers and Acquisitions
15 Where to Go to Beat the Odds
Executive Summary
Avoiding Failure in Mergers,
Acquisitions, and Divestitures
Human beings take risks. In business,
one of the riskiest moves company
stakeholders can take is to acquire and
merge with another company or to
divest part of what they have. Despite
the best initial intentions between the
merging companies, many mergers,
acquisitions, and divestitures produce
results far below expectations. For
some companies, the experience can
be more than maddening – it can be
deadly, ending with the demise of the
business.
Will your merger, acquisition, or divesti-
ture (appropriately enough, the acronym
is MAD) succeed or fail? If you answer
that question with historical eyes that
look back at major mergers for almost
20 years, you might as well toss the
coin. Your MAD journey has a 50–50
chance of failing. Such a high failure rate
should raise a red flag to any company
getting ready to go MAD.
However, despite these odds, mergers
continue to increase unabated world-
wide, and the failure rate is keeping
pace. Companies will continue to make
the same mistakes – unless they can get
advice from white papers like this one.
4 SAP White Paper – Madness? Mergers, Acquisitions, and Divestitures
Why do so many MAD attempts fail?
This paper discusses why failure hap-
pens and how to prevent it by following Despite continued
the overriding best practice in successful record setting in global
acquisitions, mergers, and divestitures:
preparedness. Knowing how to prepare, deals, at least half are
what to prepare, and when to prepare. doomed to failure.
At what point in going MAD does failure
most often occur? The paper identifies
the phase in the merger and acquisition
process where the breakdown occurs.
And it describes what is required to
prevent that failure.
Finally, what do you need to assure both
sanity and success? This paper presents
the steps to swiftly and precisely exe-
cute a migration path using a specific set
of solutions for successful mergers,
acquisitions, and the divestitures that
often result. These solutions support
a flexible IT environment, the important
premerger assessment phase, and the
critical postmerger integration support
– without which the whole MAD deal
can go bad.
In the Name of Growth
Beating the Odds
It is the age of the megadeal. Fueled by
ongoing consolidations, pressures from
globalization, and a rise in interest from
private equity, the number of mergers
and acquisitions is growing at a frenetic
pace around the globe – and has been
for years. Between 2002 and 2005, for
example, merger values in the United
States rose from US$462 billion to
over $1.5 trillion – a 35.6% compound
annual growth rate.1
Risky Business
Whether they are pursuing market lead-
ership, hoping to leverage synergies
across an installed base, or needing
economies of scale, most industrial
manufacturing and components (IM&C)
companies engage in mergers, acquisi-
tions, and divestitures for two reasons
– growth and the promise of huge bene-
fits and gains to shareholders. However,
growth is fodder for risk, and few areas
of business are as risky as mergers and
acquisitions. Despite continued record-
setting global deals, at least half are
doomed to failure. In fact, Wharton
research places the range of failure at
50% to 80% – risky business, indeed.2
A Common Path to Success
Mergers typically fail at the process and
systems integration phases. Integrating
the sales force to sell new products
1. Why Do So Many Mergers Fail? (Knowledge@Wharton, knowledge.wharton.upenn.edu/article.cfm?articleid=1137&specialid=30, March 30, 2005).
2. Ibid.
3. Enabling Growth Through Mergers and Acquisitions, SAP Executive Insight, (SAP AG, 2007), p. 7.
Success depends on your company’s ability to meet
the challenges of postmerger integration.
and services, reporting results for a
newly combined entity, and setting up
processes to encompass new divisions
are no small tasks. Success depends
on your company’s ability to meet the
challenges of postmerger integration.
These challenges are especially critical
for IM&C manufacturers, as combining
complex supply chains and assimilating
unfamiliar products and processes can
be daunting.
However, the time to address post-
merger challenges to ward off failure is
not only when they happen, but a long
time before – in the premerger assess-
ment phase. During this phase, it is
important to define the role of your IT
group in facilitating a rapid and effec-
tive integration. To assure a successful
merger, an integrated business process
platform is required to ensure integrated
processes and harmonized information.
To execute mergers flawlessly, many
companies that lead in mergers, acqui-
sitions, and divestitures use such a plat-
form. IT’s involvement in implementing
and supporting the platform throughout
the planning and execution phases is
essential.
SAP White Paper – Madness? Mergers, Acquisitions, and Divestitures
In an SAP study completed in December
2006, 175 leading companies spoke
about the business initiatives they under-
took to ensure operational excellence or
improve business agility – and how IT
supported these initiatives.3 For compa-
nies pursuing mergers and acquisitions,
IT organizations played a significant role
in reducing the time required to syner-
gize assets, processes, and systems
between the merged companies. The
study revealed a common path (see
figure) successful IT organizations used
to support mergers and acquisitions.
In addition, the following technology
elements are required to support suc-
cessful mergers, acquisitions, and
divestitures:
• Tools and services to assist your IT
team in conducting the premerger
assessment for potential synergies
• A flexible and adaptable IT environ-
ment to help IT merge and align pro-
cesses that support your corporate
growth strategy
• An end-to-end solution for the com-
mon path to accelerating postmerger
integration
5
 6–18 months

• Govern your IT environment

• Consolidate processes/systems
3–6 months

• Bring users on board rapidly Optimize IT

• Manage users’ identity Consolidate a portfolio of
4–6 months acquired applications and
platforms
• Consolidate integration bus Empowered users
• Develop composite Extend processes to
Premerger customers, suppliers, and
Business impact

employees using the most

• Implement master-data Adaptable processes appropriate user interface
management Rapidly merge processes,
• Consolidate business realize synergies with com-
intelligence platforms posites to cross-sell

Trusted information
Build an accurate business
case for the merger based on
common suppliers, customers,
and products, and faster con-
solidation of financial reporting

Months

Figure: A Common Path to Successful Mergers, Acquisitions, and Divestitures

6 SAP White Paper – Madness? Mergers, Acquisitions, and Divestitures

Premerger Assessment Phase
Building Business Value
The Role of IT
The premerger assessment determines
the value of the merger, acquisition, or
divestiture. To execute an acquisition,
you may need a strategy management
solution to help you make the right
decision. The same solution can also
help you manage your goals, initiatives,
and metrics during and after the merger;
it can make it easy for individuals
and groups to collaborate within your
orga­nization.
During the assessment, IT teams can
address any limitations to rapid post-
merger integration. They may, for
example, integrate processes, identify
master-data management (MDM) issues
that need resolution, or replace inflexible
systems that inhibit change. They also
assess the presence or lack of synergies
between the merging companies and
determine how this may impact the new
company’s infrastructure and
applications.
The premerger assessment phase pro-
vides an opportunity to conduct a peer-
to-peer analysis comparing the acquiring
and target companies. You can analyze
and compare the value of master data
for all enterprise business applications,
including enterprise resource planning
(ERP), customer relationship manage-
ment (CRM), supplier relationship man-
agement (SRM), and HR applications.
You can also assess each company’s
current governance and compliance
procedures and the use of management
tools for governance, risk, and compli-
ance (GRC). In this regard, by evaluating
the overall software architecture and
implementation of end-to-end business
processes, your IT team can ascertain
potential security vulnerabilities that
should be addressed during postmerger
integration to mitigate risk to the acquir-
ing company. In some cases, this may
include the implementation of an identity
management solution.
Gain the Insight You Need
The premerger assessment phase sup-
plies the insight you need into the fol-
lowing aspects of a merger, acquisition,
or divestiture.
Goss International Corporation
Industry: Industrial machinery and
components
Revenue: US$1.2 billion
Employees: 4,000
Summary: Goss makes commercial
web presses, and its presses are
huge – some four stories high and as
long as a football field. Following the
acquisition of Heidelberg Web Sys-
tems, Goss found itself saddled with
redundant data, duplicate systems –
including 75 separate applications –
and nonstandard business process-
es. Goss needed to standardize
processes on a single instance of the
SAP® ERP application. It was also
hobbled by the cost of a data center
service agreement and needed to
create its own data center. Therefore,
Goss set an objective to achieve
“One IT” by standardizing its global
business processes.
SAP White Paper – Madness? Mergers, Acquisitions, and Divestitures
Shared Customers
You need to assess the existing relation-
ships of shared customers and find ways
to retain those customers after the
merger or acquisition. Unified master
data and integrated applications ensure
that the merged company has insight
into profitable, top-line customers and
can focus on them immediately. These
customer relationships are vital to
IM&C manufacturers, as the combined
company can now leverage economies
of scale to serve joint customers faster
and more efficiently.
Results with SAP:
• 95% fit between Goss’s needs and
SAP best-practice road maps for
industrial machinery and compo-
nent manufacturers
• Enhanced change order control and
focus on core objectives of aligning
processes and features by follow-
ing best-practice road map
• Launch of new data center in six
months
• Single global instance of SAP ERP
and a single database to support
1,200 users at Goss sites in 6
countries
• Annual savings of $5 million in data
center contract maintenance fees,
plus lower support costs due to
reduced IT complexity
• Enhanced analyses and planning
with integrated financial information
• Improved service and sales with
accurate, up-to-date customer
information
• Reduced inventory using shared
services
7
Prospects or Target Markets
By analyzing customer data to identify
size, geographic location, or industry,
the acquiring company can assess
potential market growth. This informa-
tion also has direct impact on where to
locate manufacturing, distribution, and
sales facilities.
The premerger assess-
ment phase provides an
opportunity to conduct
a peer-to-peer analysis
comparing the acquiring
and target companies.
Shared Vendors
Merging companies need to identify
duplicate vendors across various pro-
curement activities to streamline costs
and form an efficient merged entity.
Consolidating vendors and leveraging
buying power with higher volumes are
key drivers for IM&C mergers.
8 SAP White Paper – Madness? Mergers, Acquisitions, and Divestitures
Products Technology Landscape
By assessing products in a combined Finally, the premerger assessment
portfolio, companies can determine includes an evaluation of the overall
overlap and pricing inconsistencies, synergy of IT systems, including the
identify redundant or similar products enterprise architecture, hardware, net-
and their impact on customers, and works, data stores, technology platforms,
communicate product transition plans business software, and user interfaces.
to joint customers. This step ensures The evaluation is essential to planning
that all engineering, materials manage- your comprehensive migration path and
ment, and manufacturing operations more accurately estimating potential
are in synch and not unknowingly com- savings.
peting against each other or duplicating
efforts.
Employees
By assessing roles and responsibilities,
companies can pinpoint overlap and
work with the HR organization to identify
and retain top talent. It is critical that
employee benefits and compensation
continue without interruption and that
employees realize quickly that they can
rely on the merged entity for day-to-day
operational requirements. The cultural
differences of shop-floor employees
that have never worked together in the
past can often be the first significant
hurdle of an IM&C merger.
Postmerger Integration Phase
Building End-to-End Business Processes
The Pitfalls of Postmerger
Integration
A flexible and unified IT environment
facilitates postmerger integration by
maximizing interoperability, shortening
development time, and enabling seam-
less integration internally and across
merged companies. With such an envi-
ronment, your IT organization can deliver
significant value in the postmerger inte-
gration phase.
A flexible IT environment can help reduce
the risk and effort of integration. In such
an environment, IT can unify the IT infra-
structure of the merged companies by
setting an order of priority and consis-
tently communicating changes to the
employees, customers, and partners
impacted by the merger. In addition, a
flexible IT environment helps your IT team
to drive cost savings by identifying and
eliminating redundant data, processes,
software, or systems.
A flexible and unified IT environment is
one of your best defenses against the
pitfalls of postmerger integration, which
include the following.
Overestimating Synergies
It is not difficult to overestimate the value
and underestimate the timing of a merger
without the right data or tools to evaluate
and calculate synergies. Merger makers
4. Merger & Acquisition Integration Excellence – Executive Summary (Best Practices LLC online database,
www3.best-in-class.com/bestp/domrep.nsf/Content/2660176D3C73C34485256DDA0056B49C!OpenDocument, 2000).
5. “The Real Cost of the Deal,” Hewitt Quarterly Asia Pacific, volume 5, issue 1 (Hewitt Associates LLC, 2007).
often overestimate potential synergies
and underestimate costs created by the
merger. As a result, mergers frequently
fail to achieve expected revenues.
Customer Loss
One of the top priorities in a merger is
determining which customers are profit-
able and creating a plan to retain them.
Surprisingly, the failure to successfully
transition customers to the newly
merged entity is a common postmerger
story. This failure can happen for many
reasons, such as lack of consistent
CRM processes, product duplicates, a
changed product portfolio, loss of a
trusted sales team, and inconsistent
pricing, maintenance, and support.
Employee Attrition
It is important to understand that when
employees leave as a result of a merg-
er, it is not the underperformers who
defect; it is usually the top employees.
One study of failed acquisitions found
that management attrition rates soared
47% over the three years following the
acquisition, with employee satisfaction
dropping by 14% and productivity drop-
ping by 50%.4 According to a study by
Hewitt Associates of Asia-Pacific com-
panies, top HR issues in mergers,
acquisitions, and divestitures include
retention of key employees, compliance
with applicable laws, and alignment of
culture, compensation, and benefits.5
SAP White Paper – Madness? Mergers, Acquisitions, and Divestitures
There may be other factors that hinder
your ability to retain top employees,
such as undefined or duplicate roles,
the lack of consolidated employee data,
or incompatible HR systems.
Supplier Consolidation
In a merger, cost reduction through
consolidation of suppliers can add val-
ue to the supply chain. However, in
many mergers, these consolidation
opportunities are often overlooked. You
miss opportunities for collaborative
efforts with partners in product devel-
opment, materials management, supply
chain, manufacturing, marketing, and
sales.
Poor Tracking of Key Performance
Indicators
A successful merger depends on man-
agement having visibility into the per-
formance of the combined companies,
but this may not be possible with dispa-
rate systems and databases. Neverthe-
less, the ability to measure and analyze
key performance indicators, even
before underlying systems are integrat-
ed, is mandatory to understanding the
success, partial success, or failure of a
merger or acquisition. Without the abili-
ty to track performance, you cannot
identify issues early enough to avoid
problems and the resulting loss of reve-
nue control.
9
Slow and Incomplete Integration
Booz & Company research suggests
that more mergers fail because of inad-
equacies in the integration process
than because of a fundamental flaw in
the concept.6 Without a flexible and
adaptable IT environment, it can be
extremely difficult to merge systems,
processes, and assets. In a well-
organized merger, this challenge is
addressed in the premerger assess-
ment phase, so that the adequate IT
environment is in place at the post-
merger integration.
product or market breadth while mini-
mizing costs by integrating new prod-
ucts into key systems and centralizing
MDM. Finally, you can enable increased
business scale by supporting expanded
locations, offerings, and customers
with new, quickly composed services
and applications. From a manufacturing
perspective, the faster everyone is
using the same data and same solu-
tions, the faster the benefits of the
merger or acquisition can be realized.
Again, if you have prepared early and
comprehensively for a merger, acquisi-
tion, or divestiture and have aligned
your processes with your growth strat-
egy, you can speed and simplify the
postmerger integration. Just as essen-
tial, you can also create a stable and
reliable environment to support your
core business during the transition.

Bridging the Gaps A flexible IT environ-

By integrating existing applications and
ment can help reduce
creating new shared-user interfaces, the risk and effort of
you can enable end-to-end business
processes across merged organiza-
integration.
tions. You can also support expanded

6. Post-Merger Integration (www.booz.com/global/home/what_we_do/services/mergers, Booz & Company [N.A.] Inc.).

10 SAP White Paper – Madness? Mergers, Acquisitions, and Divestitures

Solutions for Mergers, Acquisitions,
and Divestitures
Building Blocks to Beat the Odds
Across manufacturing and over 25
industries, SAP has decades of exten-
sive experience in global mergers,
acquisitions, and divestitures. From
this experience, SAP has learned how
to apply specific SAP® solutions and
services to facilitate an end-to-end
solution. SAP resources – ranging from
merger, acquisition, and divestiture
consulting services to the application
building blocks that result in a flexible
IT platform – help you navigate through
the preassessment and postmerger
phases with confidence and speed.
Solutions for the Premerger
Assessment Phase
The SAP solutions and their roles in
supporting the phases of mergers,
acquisitions, and divestitures, beginning
with the crucial premerger assessment
phase, include the following.
Strategy Management
The SAP Strategy Management appli-
cation is part of SAP solutions for
enterprise performance management –
a comprehensive set of solutions that
help your company capitalize on the
value of your existing data assets.
Because extension of the enterprise is
implicit in most acquisitions and mergers,
you may require other solutions in the
enterprise performance management
set of solutions, in addition to strategy
management.
SAP Strategy Management helps you
make the right decisions during the
execution of an acquisition and align the
acquired company’s growth strategy
with yours. As divestitures are implicit
in many mergers and acquisitions, the
application also enables you to expedi-
tiously and completely decouple a busi-
ness unit you need to spin off, or
decouple an unwanted unit you gained
in an acquisition.
Before, during, and after the acquisition
and merger, strategy management
functionality helps you drive execution
across the enterprise. It helps you man-
age your goals, initiatives, and metrics
for performance in a way that enables
everyone in your company to truly
understand how your goals affect day-
to-day and long-term operations, how
to support them, and how to measure
success. Only when decision making
is honed and all accountable individuals
are linked and aligned to your goals,
initiatives, and metrics can your organi-
zation achieve its short-, medium- and
long-term objectives.
In the broad term, with SAP Strategy
Management and solutions for enter-
prise performance management, your
company can improve its agility, align-
ment, visibility, and confidence to opti-
mize control and gain competitive
advantage. Enterprise performance
management solutions cover enterprise
planning, financial consolidation, profit-
ability and cost management, financial
performance management, and analyt-
ics. All SAP solutions for enterprise
performance management can integrate
with SAP Business Suite applications;
SAP solutions for governance, risk,
and compliance; and the SAP
NetWeaver® technology platform.
SAP White Paper – Madness? Mergers, Acquisitions, and Divestitures
For more information on SAP Strategy
Management and other enterprise per-
formance management solutions, go to
www.sap.com/solutions/performance
management/pcm/index.epx.
Business Planning and Consolidation
To manage and monitor the performance
of your mergers, acquisitions, and
divestitures, you need accurate, timely
financial and operational data so you can
effectively plan, budget, forecast, and
analyze. During a merger or acquisition,
you also need the ability to integrate
corporate and departmental planning,
intelligently model cost scenarios, and
perform sensitivity analyses to deter-
mine operational budgets based on
strategic plans and assumptions affected
by the acquisition, merger, or divestiture.
Lastly, you need a way to ensure a fully
documented audit trail and compliance
with guidelines for consolidating and
reporting company information internally
and externally for the new entity.
For use during the premerger assess-
ment and postmerger integration phas-
es – and beyond – the SAP Business
Planning and Consolidation application
can meet your budgeting, planning,
consolidation, and reporting require-
ments in a single application and user
interface. It supports the full array of
top-down and bottom-up financial and
operational planning needs, as well as
the consolidation processes necessary
to ensure a timely financial close. As a
result, you can gain the confidence to
meet increasingly stringent regulations
and reporting requirements across the
globe. For IM&C companies, global
trade and environmental compliance
11
play key roles when operations are
merged. As with financial compliance,
global trade and environmental regula-
tions must be uniform across all manu-
facturing and distribution locations.
SAP Business Planning and Consolida-
tion can help you improve decision
making with risk-adjusted planning that
identifies the probability a situation may
occur, enabling you to take preemptive
action. Your managers can use the
application to collaborate in a unified
landscape, streamlining the process of
creating and approving plans and bud-
gets. In addition, the effective use of
built-in business-process and self-service
flows reduces time spent on modifying
common business processes, and an
intuitive interface with familiar office tools
helps increase employee productivity.
The application minimizes business and
compliance risks by supporting trans-
parent financial data and a single version
of the truth to enable fast and accurate
management and statutory reporting.
Solutions for the Postmerger
Integration Phase
The solutions you need to support
postmerger integration depend on the
nature of your business and the mergers
and acquisitions you undertake. The
following SAP solutions, however, are
basic and essential to supporting the
postmerger integration phase.
Identity Management
The SAP NetWeaver Identity Manage-
ment component gives you the ability
to centralize identity management and
helps to increase security across hetero-
geneous, service-oriented architecture
12 SAP White Paper – Madness? Mergers, Acquisitions, and Divestitures
Without a flexible and adaptable IT environment, it can
be extremely difficult to merge systems, processes,
and assets.
(SOA) landscapes. The identity manage-
ment component works across systems
and across business processes to
manage identities and ensure security
in real time.
As companies service-enable their
applications, the combination of distrib-
uted enterprise services with powerful
cross-system business processes
requires that identities are managed in an
integrated, straightforward, and simple
manner. By combining proven, flexible,
and easy-to-configure identity manage-
ment software with industry-leading
business applications and an SOA-
based technology platform, SAP can
offer an end-to-end identity management
solution. This solution increases the
flexibility and agility of business units
when managing employee identities
and when managing identities across
company boundaries with customers,
distributors, or suppliers.
Because the component’s virtualization
and user provisioning technologies are
built on SOA, it can offer identity man-
agement as a service – providing scal-
able, real-time, and standards-based
access to identity information residing
in multiple repositories.
Resource and Portfolio Management
For mergers and acquisitions, the SAP
Resource and Portfolio Management
(SAP RPM) application helps you maxi-
mize the value, balance, and strategic
alignment of your product portfolio. In
support of your organization’s need for
strategic and operational portfolio man-
agement, SAP RPM provides an enter-
prise-level solution for the management
of a full range of portfolios, including
product innovation management, pro-
fessional service, and enterprise IT.
SAP RPM enables you to better control
and innovate projects, processes, prod-
ucts, and services across their life
cycles. Powered by SAP NetWeaver,
SAP RPM “snaps on” to existing het-
erogeneous IT landscapes and leverages
data from disparate systems, including
HR, financial, project management, and
desktop systems. This enables new,
cross-functional business processes and
provides ready insight into operations.
For example, built-in integration with
systems running SAP and non-SAP soft-
ware provides transparency into actual
project costs, forecasts, baselines, and
other key performance indicators across
your entire portfolio. Deep integration
with your HR solution, including visibility
into the organizational structure to sup-
port both line-of-business and talent
management, enables resource alloca-
tion and strategic capacity planning
based on up-to-date information on
skills, availability, and approval work-
flows. Furthermore, by drawing on data
from disparate applications and systems,
flexible dashboards and sophisticated
analytics enable continuous monitoring
of your portfolio’s performance.
During mergers and acquisitions, SAP
RPM aligns activities, resources, and
budgets with business priorities. So you
can maximize the value of your portfolio
and leverage your existing investments
in IT systems, skills, and resources.
And, together with other SAP solutions
powered by SAP NetWeaver, SAP RPM
can support your new-product develop-
ment and introduction processes.
Master-Data Management
Because the rationalization and integra-
tion of data and information is critical to
supporting mergers, acquisitions, and
divestitures, a master-data management
solution is probably the most essential
solution requirement. Part of the SAP
NetWeaver technology platform, the SAP
NetWeaver Master Data Management
(SAP NetWeaver MDM) component is
a comprehensive solution capable of
supporting true enterprise-wide master-
data management.
Master Your Data
SAP NetWeaver MDM not only helps
you create the master data resulting
from an acquisition and merger, but it
also empowers you to master your data.
In the context of mergers, acquisitions,
and divestitures, SAP NetWeaver MDM
helps you aggregate financial data,
rationalize business processes, and gain
a single view of products, customers,
and employees. It helps you retain cus-
tomers by focusing on those with the
deepest relationships and greatest
profit potential. It enables you to opti-
mize your product portfolio by retaining
high-margin products and spinning off
the rest. And you can rationalize your
workforce by identifying key skill sets
and matching your best employees with
available jobs.
Rationalize Your Processes and
How People Use Them
In a merger, master-data management
first comes into play following the cre-
ation of the physical infrastructure –
selecting the hardware, servers, and
networks to facilitate information while
removing excess infrastructure to save
money. After the infrastructure is ready,
an MDM solution is used to rationalize
the business applications that support
different development cycles or that
come from certain vendors. This is dif-
ficult to achieve and takes much longer
without an MDM solution. At this point,
many companies outsource or consider
shared services.
Even more difficult than rationalizing
applications, however, is rationalizing
processes and how people use them.
To achieve this during the postmerger
integration, you need to create a single
view of your products, materials,
customers, and employees. A compre-
hensive MDM solution enables you to
capture this view; without this, it can
take a long time to accrue the benefits
of the acquisition and subsequent
merger. In truth, it can take so long to
achieve benefits that management may
lose focus on the whole process. With
the single view enabled through an MDM
solution, however, the effectiveness of
the acquisition can be expedited rapidly,
and benefits can be realized sooner.
SAP White Paper – Madness? Mergers, Acquisitions, and Divestitures
Enable Dynamic Integration
During postmerger integration, a com-
prehensive MDM solution offers flexi-
bility by supporting dynamic integration
in a complex, heterogeneous environ-
ment filled with different systems, data-
bases, repositories, and applications.
MDM functionality gives you the ability
to bring together data from many differ-
ent sources and rationalize it easily and
quickly.
Provide Centralized Data and Support
for Remote Locations
Today, many companies still do not
have an enterprise-wide master-data
management solution, resulting in low-
quality data that is often difficult to
access. However, a comprehensive
MDM solution houses master data in a
central repository that is easy to
access and use. With such a solution,
even as the postmerger integration is
proceeding, you can have the accurate
and consistent metrics and analytics
you need to stick with your growth
strategy.
As companies implementing an MDM
solution build a single view of products
and customers, they can focus more
precisely on where they actually “do”
the business process – where they
launch an available-to-promise inquiry
for a customer or start the develop-
ment of a new product. They know that
the applications supporting these activ-
ities may be quite remote from where
the master data itself is created and
managed. During postmerger integra-
tion, a comprehensive MDM solution
supports the complex business process-
es and services you need for disparate
and remote operations.
13
Best Practices in Master-Data
Management
The best practice of preparation applies
to master-data management, because
master-data management should be
part of your portfolio approach and
infrastructure prior to an acquisition and
merger. It allows you to analyze the
merging company’s master data, recon-
cile it as a preliminary step, and use
that data to execute the acquisition and
merger transactions. If you’re a manu-
facturing holding company, for example,
you can make master-data management
part of your portfolio approach and
enable new acquisitions to merge with
your company quickly and efficiently
through the use of a global template.
A second best practice to follow in
mergers, acquisitions, and divestitures
is defining scope. If you are acquiring a
company because of its sales channels,
you would implement master-data man-
agement focused on the customer. If you
are acquiring a company to rationalize
your product or supply base, master-data
management would focus on product
and supplier rationalization and on man-
ufacturing consolidation. Preparing,
defining, and publishing the scope
before you put people on the ground
helps you achieve benefits more quickly.
Solutions for Building a Business
Process Platform
To help an IT organization achieve the
agility it needs to support mergers,
acquisitions, and divestitures, SAP soft-
ware, services, and technology support
the evolution of existing IT infrastructures
14 SAP White Paper – Madness? Mergers, Acquisitions, and Divestitures
into a more flexible business process
platform. A business process platform
is a unified environment – based on
SOA – that companies implement to
perform business processes across
the IT landscape.
In SOA software can be defined and
written as building blocks of Web ser-
vices that conform to a set of standards
and principles, which allows for their
execution and reuse. Based on open
standards, Web services facilitate
greater interoperability between software
systems, integration of applications,
and rapid innovation of new business
processes.
To deploy a business process platform,
IT organizations can start with the SAP
NetWeaver technology platform and
software from SAP to help manage cur-
rent business processes more efficiently
and cost-effectively. IT teams can build
upon these SAP solutions and extend
their business process platforms by
adding SAP and non-SAP functionality
to meet specific needs.
SAP provides the following building
blocks to support a business process
platform.
Ready-to-Execute Software for
Business Processes
SAP applications, such as those that
comprise the SAP Business Suite family
of business applications, are SOA
enabled and provide functionality for
running core business processes. This
functionality can be adapted easily
using enterprise services.
Reusable Enterprise Services
SAP solutions that support business
activities are modularized into process
steps and exposed through enterprise
services. These enterprise services
share common business semantics to
improve governance and communica-
tion between applications.
Unified Technology Foundation
SAP NetWeaver unifies technology into
a stable foundation that enables the
smooth operation of core applications
across a heterogeneous environment.
It also supports rapid innovation by
delivering hundreds of Web services
that can be combined and extended via
easy-to-use composition tools.
Building on an Integrated IT
Environment
With a business process platform en­­
abled by SAP software and technology,
IT organizations can respond rapidly to
change, drive business process innova-
tion, and reduce costs across the
merged companies. For example, to­­
gether with the SAP NetWeaver Process
Integration offering, SAP NetWeaver
MDM can consolidate data, remove
duplicates, and merge customer records.
Then, using a sales cockpit and the
SAP NetWeaver Portal component,
you can enable account managers to
access all available information about a
particular customer and perform com-
plex pricing calculations quickly.
The Hallmarks of Successful
Mergers and Acquisitions
Strong Leadership, Cultural Adaptability,
and Flawless Execution
Whether the objective of your acquisi-
tion or merger is acquiring new markets,
realizing cost synergies, or obtaining
new technologies, achieving it depends
on preparation, strong leadership, cul-
tural adaptability, and flawless execution.
As discussed earlier, many leaders who
flawlessly execute mergers, acquisitions,
and divestitures leverage an integrated
business process platform to help them
achieve their objectives, which are the
following:
Standardization. Leaders know speed
is of the essence. When are the board
and financial markets expecting results
from the merger? How long will cus-
tomers be patient if there is a service
disruption? Only through standardized
processes can an organization scale
and provide consistent results. A busi-
ness process platform is the fastest way
to drive common business practices
across a merged organization.
Visibility. Leaders need to determine
which savings potential they can realize
without interrupting or jeopardizing the
business. In which market segments can
they cross- and up-sell? Acting upon
the right information of the joint entity
is critical. Only integrated systems can
provide the needed information at the
speed of change.
critical in supporting effective commu-
nication to the organization. When joint
Whether the objective achievements are visible through stan-
of your acquisition or dardization, they can be communicated
more rapidly. This, in turn, creates
merger is acquiring new greater employee satisfaction and a
markets, realizing cost positive outlook on the future prospects
of the merged business.
synergies, or obtaining
new technologies, Where to Go to Beat the Odds
To take the “MADness” out of mergers,
achieving it depends acquisitions, and divestitures and level
on preparation, strong the playing field for your IM&C company,
visit SAP today at www.sap.com/usa
leadership, cultural /solutions/executiveview/finance
adaptability, and flaw- /index.epx.
less execution.
Control. Leaders are aware of the
risks. Which employees and customers
need to be retained at all costs? Which
employees and customers are most
likely to defect? Without control over
these and other critical aspects of the
business, the answers remain guess-
work. And guessing is risky.
Communication. Leaders focus on cul-
ture and people. How will the organiza-
tion cope with change? What values
define the new organization? Standard-
ization, visibility, and control are all
SAP White Paper – Madness? Mergers, Acquisitions, and Divestitures 15
50 091 473 (08/09) Printed in USA.
©2008 by SAP AG.
All rights reserved. SAP, R/3, xApps, xApp, SAP NetWeaver, Duet,
PartnerEdge, ByDesign, SAP Business ByDesign, and other SAP products
and services mentioned herein as well as their respective logos are
trademarks or registered trademarks of SAP AG in Germany and in several
other countries all over the world.

Business Objects and the Business Objects logo, BusinessObjects,

Crystal Reports, Crystal Decisions, Web Intelligence, Xcelsius and
other Business Objects products and services mentioned herein as
well as their respective logos are trademarks or registered trademarks of
Business Objects S.A. in the United States and in several other countries.
Business Objects is an SAP Company.

All other product and service names mentioned are the trademarks of their
respective companies. Data contained in this document serves informational
purposes only. National product specifications may vary.

These materials are subject to change without notice. These materials

are provided by SAP AG and its affiliated companies (“SAP Group”) for
informational purposes only, without representation or warranty of any kind,
and SAP Group shall not be liable for errors or omissions with r­ espect to
the materials. The only warranties for SAP Group products and services are
those that are set forth in the express warranty s­ tatements accompanying
such products and services, if any. Nothing herein should be construed as
constituting an additional warranty.

www.sap.com /contactsap