We talked about due-diligence; we talked about merger/transition period; but now its time to talk about the short (albeit crucial) middle step of a merger/acquisition: the contract signing and the day-one milestone.
After spending months if not years of extensive planning across multiple departments – not to mention countries – the big day arrives; the contract is signed, they hand over the keys and – just like that – your to do list shot through the roof. What computers will you be using? Will you shift over to a new email system or hold onto the old ones? Are there contracts/services from the bought company that we’re forgetting about?
On top of all these crucial decisions being made, you need to make a vital management call: in which situations do you push change and which situations do you stay in order get as much productivity as possible in this transition period?
Here to help you juggle the minor tasks and the global ones to accomplish your day-one milestones is D4M COO Jean-Yves Durocher. With over 14 years’ experience in SAP rollouts, he’s here to help you stay on task by prioritizing tasks between road-maps versus global transitions so you can hit your milestones while also chipping away at global software tasks.
Jean-Jacques: Due diligence seems like a very complicated process. So out of sheer curiosity, how long would this process take?
Jean-Yves: This process could take a variety of different times; it all depends on the size of the company and the industry. So, it could be anywhere between two or three months; it could be a half a year – It depends. I would say if you’re a pharmaceutical company versus, say, a retail company, it may vary because of the size of the company, the number of locations, etc.
Jean-Yves: If you’re buying a company that has operation in many countries, operational/legal jurisdictions, etc; I’d say the bigger and the more complex the organization is, the more time it might take. But, obviously, in those cases, the team, the due diligence team that will be assigned to the task
Jean-Yves: Is typically in proportion to what you’re trying to buy, but long story short, I would say it could be anywhere between two to eight month period. It depends, again, on complexity, geography, size, etc.
Jean-Jacques: Looking at it then, would you say that there are three steps in a rollout process. The first would be all of this legal and planning. And then the third one would be the rollout. So, I assume the second step – ie the transaction of the merger – doesn’t take very long? I’m, assuming the second step is when the business signs on the dotted line.
Jean-Yves: Yeah. The second step – typically – would be once the due diligence is completed, then there’s a letter of intent that is being signed – which is some form of commitment to buy or to proceed with the transaction. That then triggers negotiation, discussions regarding price, outlining the period of transition and so on. This is a period of negotiation to finalize all the arrangements because it obviously goes beyond the amount of money that will be spent. There’s a financial aspect is only the beginning of the discussion which then into considerations beyond money.
Jean-Yves: That would be, I would say this is the second part of a of the merger/acquisition. Now, typically, during this second step, the IT department will try to zoom in a bit more on the transition period because the third phase, which I’ll describe in a minute, is what people call the “day-one”.
Jean-Yves: So, once the transaction is agreed upon, signed and you agree to a transaction date to buy the company (ie: December 1st) then there is a very intense amount of work to orchestrate and plan for the “day-one”. So, the day that you officially get the ownership of the company, the transaction is done, the money has been exchanged and the merger is moving forward.
Jean-Yves: Then, once you officially become the owner, so many things have to happen on a day-one – from the minute changes to the big ones. The simplest example I can give is how you will approach email address. If you’re buying a company, a fundamental problem you must solve is: do you want all the employees to run under the new email address, or you will let the company that you just purchased hold onto their current email address for a month, two months and so on. There are so many crucial decisions that needs to be completed AND – worst of all – there’s not a one size fits all to accomplish them.
Jean-Yves: Granted, there is some options that are easier to roll out and less complicated than others are for various reasons; you might want to do certain tasks immediately for on day-one while letting others fall by the wayside. But the thing is, on day-one, you officially own the company and thousands of problems need to be solved so that this acquired company is not only at functioning levels, but to also bring in potential benefits to your company.
Jean-Yves: So, the day-one, there will be a lot of activity focused on the day-one milestones. I just talked about deciding on your company wide email policy, but this is just 1 item on of a very, very long list of tasks necessary just for the first day of the merger! So, mergers require extensive planning especially for your first day of the MnA cycle. Don’t forget that date; it’s the first important milestone in a long line of tasks.
Jean-Jacques: So, just to be clear, then due diligence often refers to a company-wide examination of what is being done day one, you could – in theory – do even more planning down the line?
Jean-Yves: Potentially, yes; let me take this back a bit. In a merger/acquisition, there are two types of planning and what I just described.
Jean-Yves: Planning type 1: the road map. What you need globally on a more global scale is a road map. But, your road map will pretty much have the first milestone in the road map. The road map will be day-one. What do we need to do for the day that we take possession? Butm the road map will also have – right after that – the plan for the transitions. A perfect example I can give you is regarding ERP.
Jean-Yves: So, it’s very unlikely that on day-one, both ERPs currently running – one from the buyer’s plant and the one from the purchased plant – will have merged their ERPs together. It’s almost never happened because this process is part of a much bigger time frame. It takes months – sometimes years – to integrate E. R. P. S. to integrate process. It’s a major undertaking.
Jean-Yves: So, typically what would happen is the company that’s being bought that will keep running their ERP just like before for a certain time; this is why it’s a transition period. There might be an agreement from the buyer that they will let the old ERP run for a certain amount of time.
Jean-Yves: The old ERP software could be in place for 6 months to a year or more. But that decision is – at the end of the day – part of the road map. There has to be somewhat of a target date where the company that’s being purchased will have to decouple/decommission all of their systems and get on board with the system of the buyers.
Jean-Yves: So that’s why it’s part of the transition plan. Not everything will happen overnight; some components could be done one at the time, but others like ERP, could be a task by itself to as it is a complicated task that takes more time and effort.
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