Technological Tools For Moving the Deal Along

As merging organizations search for ways to perform more thorough due diligence and speed up integration, while keeping costs under control, they are increasingly turning to newly devised technology to assist them throughout the m&a process. Decision-support tools, project and program management capabilities, and communication hubs are among the m&a-focused technologies that help organizations move quickly and thoroughly through the numerous phases of the deal, including due diligence and postmerger integration. These tools assist in solving critical problems and help to greatly enhance return on investment and the ultimate success of a deal. Technological innovation has streamlined the m&a process through such innovations as web-based management sites and virtual data rooms on the pre-closing side and systems for harmonizing personnel and other information on the postmerger integration side. Web-based m&a management sites provide a common platform through which companies can immediately access and analyze crucial information from disparate sources, allowing deal teams to navigate through complex processes with clear-cut priorities. Applications like the Hewitt TransAction Manager, for example, reflect best practices from the world’s most acquisitive organizations, providing access to a full range of proven tools and processes to support target screening, due diligence, integration, and project coordination. Use of these replicable, yet customizable, processes and tools allow companies to manage their deal teams in an integrated fashion – increasing speed and accuracy while decreasing costs and potential errors. In some instances, companies may choose to build such information sites on their own. Typically, this is in direct response to a CEO’s declaration that the organization’s business strategy is to grow through acquisitions. The challenge is to take action quickly because once a deal is in the works, it’s too late. A deal team can’t take time out from assessing a potential target or preparing for integration to assemble a comprehensive repository of best practices, information, policies, and forms. Moreover, building a new site for every deal is impractical and cumbersome and it is far better to create a site that can be reused, with specific variations, as the succeeding deals are done. For many organizations, building such a tool in-house can be cost-prohibitive and time-consuming, if not impossible. These firms probably will be able to reap greater advantages by linking with an outside partner that has expertise in the technology, rather than tackling such a huge undertaking on their own. In addition to providing a pre-built and proven resource, the consulting partner maintains and upgrades technology, leveraging the investment across a large client base. The partner also serves as a clearinghouse of sorts for accumulating the best practices that can be shared. If a partner observes a client struggling in one area of the m&a process, it can build a tool to ease that problem and then share it across an entire client base. This saves other clients the aggravation of recognizing such a need only after it’s too late to do anything about it. Virtual Data Rooms Inefficiency of the traditional physical data room poses one of the greatest due diligence challenges to dealmakers. As a result, both buyers and sellers are turning to virtual data rooms. In a traditional data room scenario, many locations may be involved, requiring information to be shipped, faxed, and e-mailed back and forth. Such an approach is expensive and time-consuming, requiring travel and a variety of on-the-ground resources in order to move interested parties through the process. What’s more, potential buyers only have limited amounts of time in which to access materials, and they are not allowed to make copies for later review off-premises or for sharing with colleagues. With a virtual data room, no physical space is required. The virtual data room is an on-line electronic repository that centralizes all information and allows documents to be shared and accessed from anywhere in the world. Having an environment in which people from numerous locations can access information simultaneously is particularly valuable when potential buyers may have just a few days to decide whether they want to bid on a property. In traditional data rooms, bidders and their teams may use different formats to post issues and request information – Excel spreadsheets versus Word documents, for example – and this may present compatibility problems that slow the process. However, new tools provide issue-tracking capabilities, allowing those who have visited the virtual data room to post their issues and have them combined in one central location and one common platform. Thus, it’s easier for the buyer’s deal team to sift through the information from multiple teams and draw more meaningful conclusions. A filterable data request capability, coupled with the centralized data repository, also allows a buyer’s deal team to create a request for a specific target based on the type of transaction – an asset deal versus a stock deal, for example. The investigators are able to create overview reports of the seller and provide a snapshot of the organization up front. This allows for rapid assessment of synergies and liabilities, which, in turn, allows the potential buyer to find ways of mitigating risks prior to closing. If both buyer and seller consent to opening their records, they can even create a pro forma view of the merged organization before an agreement is signed. Make Systems Talk During integration, merging two disparate human resource management systems can take months, if not years, significantly hindering the new organization’s ability to perform even simple tasks, such as compiling a total headcount. Without accurate workforce figures, it’s impossible to make informed decisions on possible postmerger personnel reductions, for example. However, there are technological tools that can bring order out of chaos. They build bridges between multiple and divergent databases and consolidate data. This allows the new organization to create reports, model outcomes, and make the kind of critical people-related decisions that shareholders expect. Chaos-Free Collaboration The sheer logistics of collaborating among large deal teams and outside vendors often prove quite problematic. Under pressure to achieve desired synergies as quickly as possible, organizations face an almost infinite number of tasks that must be done. There’s a need to prioritize and focus efforts on the most critical facets as early as possible. The ability to achieve targets on time is directly related to how quickly the newly merged organization can get a handle on its people issues. In order to keep teams focused on the underlying objectives of the transaction, team members are required to continually report on how they are doing when it comes to meeting their scorecard objectives, such as synergy achievement. Task and milestone reporting templates help them prioritize their activities, uncover interdependencies among teams, and organize how they report information to the project management office. Consequently, deal teams and program manager are better equipped to focus on high-level risks and other critical issues that emerge throughout due diligence and integration. Websites designed for m&a combine a library of expert content, a company’s tools and processes, and tight integration schedules into project, program, and collaboration capabilities to ensure that deal execution happens quickly and effectively. Companies often use such tools to direct merger implementation in key functional areas because they offer instant access to a plethora of comprehensive, integrated information that is relevant to people issues as well as financial, operational, and other areas of a company. In many respects, a merger or acquisition forces a company’s hand. If the deal is to be successful, the combined company has no choice but to invest in tools and resources that will aid in the creation of new organizational structures and address potential liabilities. Savvy organizations recognize that such improvements need not reside solely with those aspects of the business directly related to the deal. Those activities are just the tip of the iceberg, as the post-deal environment presents a unique opportunity to look at how services are provided throughout the organization and to make permanent changes in a variety of areas, from the delivery of IT to the delivery of HR. Craig Martin is a leader in Hewitt Inc.’s Global Corporate Restructuring and Change practice and is the product manager for Hewitt TransAction Manager. Bob Prezioso is head of the HR technology services team in Hewitt’s Global Corporate Restructuring and Change practice. Copyright 2004 Thomson Media Inc. All Rights Reserved. http://www.thomsonmedia.com http://www.majournal.com