Data management challenges in M&A

Mergers and acquisitions often trigger substantial organizational uncertainty about what lies ahead: typically, the operational model and culture undergo significant transformations for one or both of the merging entities. These alterations extend beyond just a new name and executive leadership; first and foremost, M&A change the way IT teams work. Anticipating and addressing these IT challenges can pave the way for smooth and efficient integration. Conversely, failure to foresee and manage these issues can result in poor business performance, attrition of key talent, and potential data breaches. In this article, experts from AINSYS delve into the IT complications that can emerge during and post M&A, and provide tools for addressing them effectively.

During and after M&A, two companies’ tech stacks essentially collide, and IT management has to deal with a number of challenges:

1. Integrating disparate systems and platforms

Integrating disparate systems and platforms is one of the most significant challenges during mergers and acquisitions. When two companies come together, they often bring with them different IT systems and platforms that have been tailored to their specific business processes and needs. These systems can range from customer relationship management (CRM) and enterprise resource planning (ERP) systems, to data management platforms, financial systems, and more.

Here are some of the key issues that arise during this integration process:

• Compatibility: the systems used by the merging companies may not be compatible. They may be built on different architectures, use different data formats, or be based on different technologies. This can make integration a complex and time-consuming process;
• Data Consistency: each system may have its own way of storing and structuring data. Ensuring consistency in data definitions, formats, and structures across all systems is crucial to avoid confusion and errors in data analysis and decision-making;
• Redundancy: there may be significant overlap in the functionality of the systems used by the two companies, leading to redundancy. Identifying and eliminating these redundancies is important to avoid unnecessary costs and complexity;
• Security and Compliance: each system will have its own security measures and compliance requirements. Ensuring that the integrated system meets all necessary security standards and regulatory requirements is crucial;
• User Training: Employees from each company will be familiar with their own systems, but may need training to use the new integrated system effectively;
• System Performance: Integrating two systems can put a strain on the performance of the IT infrastructure. Ensuring the integrated system performs effectively without causing downtime or delays is important.

2. Reconciling different data formats and standards

When two companies merge, they bring with them different data systems that have been tailored to their specific needs and processes. These systems may use different data formats and adhere to different data standards, which can create several issues during integration, including data inconsistency, data loss (if one system uses a data format that the other system does not support, some data may be lost during the conversion process, leading to incomplete or inaccurate data in the integrated system), data quality (one system might allow for missing values in certain fields, while the other does not), and compliance issues.

3. Significant differences in the technological maturity between the two companies

If one of the companies has a significant technological advantage over the other, several issues may arise:

• Integration Complexity: if one company uses modern, cloud-based systems while the other still relies on legacy systems, integrating the two can be complex and time-consuming. It may require significant resources to upgrade or replace outdated systems;
• Operational Disruptions: if one company’s systems are automated and the other’s are manual, it could disrupt business processes and workflows until the less advanced systems are upgraded;
• Security Risks: Older, less advanced systems may have more vulnerabilities, increasing the risk of data breaches or cyberattacks. It’s crucial to assess and address these risks as part of the integration process.

4. Considering the human element

This is perhaps the most complex and difficult issue to solve, seeing as no specialist is alike and supporting employees through change in M&A is the most important matter you will need to solve. Why is that? Well, the reason is that the success of any merger or acquisition is not just about integrating systems and processes, but also about bringing together people from different organizational cultures. Employees are the backbone of any organization, and their acceptance and adaptation to change can significantly impact the outcome of the M&A.

The problem is, employees are conservative and don’t want to switch from systems they have been using for years, having to learn new skills to actually use them. Additionally, companies often have to hire additional employees or IT consultants in order to support them through the process.

And it is not like executives can allow their employees to take their sweet time to figure out a whole new way of doing things – they need to start profiting from the merger or acquisition as soon as possible.

Merging or acquiring companies must shift the day-to-day behavior and mind-sets of their employees to protect a deal’s sources of value, both financial and organizational, and to make changes sustainable. Yet when McKinsey asked 3,199 leaders if they regarded the change programs at their own companies as successful, only one-third did.

In fact, comprehensive change management strategies are vital in easing transitions during mergers and acquisitions (M&As), as they help increase acceptance among employees and minimize potential disruption. Here’s how these strategies can be applied:

• Implement Surveys for In-depth Understanding: confidential surveys can encourage employees to express concerns they might not voice in person. These surveys should be designed to address specific issues identified during the interviews, such as opportunities for promotion. The responses can provide a more detailed understanding of the company’s situation;
• Compile and Present a Detailed Report to Stakeholders: the findings from the interviews and surveys should be compiled into a comprehensive report. This report should highlight both the positive aspects and potential issues within the company, such as knowledge gaps or cultural problems. The report should be presented to stakeholders in a clear and concise manner;
• Include Personalized Action Plans in the Report: the report should also contain personalized action plans for key tasks. This assigns responsibility and accountability, ensuring that important tasks are not overlooked. A well-implemented action plan can drive value-generating changes in the company;
• Perform a Potential Resistance Analysis: a potential resistance analysis can identify potential obstacles within both organizations involved in the acquisition. This step should avoid creating a divisive ‘us versus them’ mentality. Instead, it should focus on understanding employee concerns, perceived negatives of the deal, and their vision of their future roles in the company. This analysis can help drive the acquisition forward in a positive and inclusive manner.

Other issues can be solved via the right tool that addresses every issue mentioned.

How to effectively address data-related M&A challenges?

To effectively address the challenges posed by M&A, a comprehensive approach is required that not only addresses the technical aspects but also the human element. A no-code data sync and integration solution that serves as a central source of truth can be the key to this approach. This solution would transform data into a uniform format and securely store it in a single data warehouse, simplifying the integration process and ensuring data consistency and security.

A central source of truth (CSOT) is a concept in data management that refers to a single, authoritative source of data that everyone in the organization agrees is the real, trusted number. In the context of M&A, a CSOT can help to eliminate data inconsistencies and redundancies, streamline data management, and ensure that all employees have access to the same, accurate data.

By transforming all data into the same format, a CSOT can help to overcome the challenges of integrating disparate systems and reconciling different data formats and standards. No code aspect of the tool can significantly reduce the complexity and time required for data integration by involving business in the process. This ensures that all data is consistent and reliable.

Moreover, by storing all data securely in one data warehouse, a CSOT can help to maintain data privacy and security during and after the M&A process. This can help to prevent data breaches and ensure compliance with all relevant regulations.

The Role of No-Code Data Solutions

No-code data solutions can play a crucial role in implementing a CSOT. These solutions allow users to manage and manipulate data without needing to write any code, making them accessible to both IT specialists and employees with no coding experience. This can help to speed up the integration process and enable companies to start profiting from M&A right away.

Furthermore, by enabling non-technical employees to work with data, no-code solutions can help to address the human element of M&A. They can get more employees on board with adopting new systems and for them to adapt to new workflows. This can help to reduce resistance to change and increase employee engagement and productivity.

In addition, no-code solutions can reduce the need to hire IT consultants or spend time figuring out the best IT architecture option. This can result in significant cost savings and allow companies to focus their resources on other aspects of the M&A process.

Conclusion

In the face of M&A, change is inevitable. But with the right tools and approach, companies can turn this change into an opportunity for growth and success. Navigating the complexities of M&A is simplified with AINSYS. Our unique ETL architecture promotes data normalization and can handle enterprise-level loads. We’ve streamlined the data pipeline setup process, reducing the time it takes to successfully merge two IT architectures from months to weeks or even days. With AINSYS, you can upgrade your software stack faster, cheaper, and stress-free for your team.

AINSYS’s unique ETL architecture promotes data normalization and can handle enterprise-level loads. Its no-code integration framework allows users to create, edit, and test data pipelines quickly, bypassing the need for extensive technical documentation. This accelerates the integration process, reducing the time to MVP from weeks to hours. AINSYS also promotes data normalization, which is crucial in M&A scenarios where different data formats and standards are used. By transforming all data into a uniform format and securely storing it in a single data warehouse, AINSYS ensures data consistency and security.

AINSYS’s no-code approach is superior to other platforms in terms of customization as it provides direct access to document data structures at any level of depth. This allows for seamless integration of modern, cloud-based systems with legacy systems, reducing the complexity and time required for data integration.

Finally, AINSYS’s GUI empowers workgroups of non-technical users to set up data pipelines and automate workflows in minutes. This reduces resistance to change and increases employee engagement and productivity. Furthermore, AINSYS’s user permissions can be configured to maintain privacy while collaborating with third-party developers, reducing the need for hiring IT consultants or spending time figuring out the best IT architecture option.

Ready to transform your M&A process? Contact AINSYS today and let us help you navigate the path to successful M&A.

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