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CP-102:Successful M&A, ERP Integration, and Transformation Strategies
Aaron Raddock, Jonathan Reynolds, Kim Clark PakstysBDO
Deltek Insight 2
JONATHAN REYNOLDSManaging Director, Enterprise
Resource Planning Practice
Direct: +703-336-1674
Mobile:+571-205-5757
AARON RADDOCK, CPANational Leader, Government
Contracts Group
Direct: +703-336-1693
Mobile:+203-912-1281
Introductions
KIM CLARK PAKSTYSManaging Director,
Transformation Services
Practice
Direct: +703-770-9049
Mobile:+703-201-9229
Deltek Insight 3
Agenda
• The Lifecycle of a M&A Deal
• Diligence Pitfalls
• Post-Merger Integration
• ERP Integration Best Practices
• ERP Integration Pitfalls
• BDO’s Integrated Approach to Change
• Transformation Drivers
• Integration & Transformation Objectives
• Transformation & Integration Lessons Learned
• Transformation & Integration Best Practices
• Key Takeaways
Deltek Insight 5
Keep the business driver(s) in mind throughout the integration process, whether it is
growth, synergies, diversification, client or contract access, etc. The strategy should
drive the integration activities
• Market Evolution
Natural business and market evolutions and associated disruptions can affect how a
contractor does business.
• Organizational Changes
Organizational changes affect every part of the business – governance, financials,
processes, people and information systems.
This can process can involve:
Leadership & staff changes
Restructure, consolidation & scaling
M&A, divestiture
• Growth
New contracts, customers, and capabilities drive the need to evaluate systems and
processes for continued success.
Why Do Companies Merge?
ERP System
Optimization
Data migration
support
Configuration design &
implementation
Deltek Insight 6
The Lifecycle of a M&A Deal
ERP System
Optimization
Data migration
support
Configuration design &
implementation
Corporate Strategy
Identifying Parties
Pre-Diligence Considerations
Due Diligence Process & Logistics
Change Management
Definitive Deal
Documents
Post-Close Integration
The M&A lifecycle
involves all parties,
from ordinary Due
Diligence to ERP
systems
integration
Deltek Insight 7
The Lifecycle of a M&A Deal
ERP System
Optimization
Data migration
support
Configuration design &
implementation
Corporate Strategy
Identifying Parties
Pre-Diligence Considerations
Due Diligence Process & Logistics
Change Management
Definitive Deal
Documents
Post-Close Integration
The M&A lifecycle
involves all parties,
from ordinary Due
Diligence to ERP
systems
integration
Deltek Insight 8
The Lifecycle of a M&A Deal
ERP System
Optimization
Data migration
support
Configuration design &
implementation
Corporate Strategy
Identifying Parties
Pre-Diligence Considerations
Due Diligence Process & Logistics
Change Management
Definitive Deal
Documents
Post-Close Integration
The M&A lifecycle
involves all parties,
from ordinary Due
Diligence to ERP
systems
integration
Deltek Insight 9
The Lifecycle of a M&A Deal
ERP System
Optimization
Data migration
support
Configuration design &
implementation
Corporate Strategy
Identifying Parties
Pre-Diligence Considerations
Due Diligence Process & Logistics
Change Management
Definitive Deal
Documents
Post-Close Integration
The M&A lifecycle
involves all parties,
from ordinary Due
Diligence to ERP
systems
integration
Deltek Insight 10
The Lifecycle of a M&A Deal
ERP System
Optimization
Data migration
support
Configuration design &
implementation
Corporate Strategy
Identifying Parties
Pre-Diligence Considerations
Due Diligence Process & Logistics
Change Management
Definitive Deal
Documents
Post-Close Integration
The M&A lifecycle
involves all parties,
from ordinary Due
Diligence to ERP
systems
integration
Deltek Insight 11
The Lifecycle of a M&A Deal
ERP System
Optimization
Data migration
support
Configuration design &
implementation
Corporate Strategy
Identifying Parties
Pre-Diligence Considerations
Due Diligence Process & Logistics
Change Management
Definitive Deal
Documents
Post-Close Integration
The M&A lifecycle
involves all parties,
from ordinary Due
Diligence to ERP
systems
integration
Deltek Insight 12
The Lifecycle of a M&A Deal
ERP System
Optimization
Data migration
support
Configuration design &
implementation
Corporate Strategy
Identifying Parties
Pre-Diligence Considerations
Due Diligence Process & Logistics
Change Management
Definitive Deal
Documents
Post-Close Integration
The M&A lifecycle
involves all parties,
from ordinary Due
Diligence to ERP
systems
integration
Deltek Insight 13
• Small Business Compliance
The transferability and/or future qualification of set aside work will continue to be a
mainstay diligence issue
• Past Performance
With increased competition, past performance ratings can dramatically influence the
award of future work
Structure of transaction can result in loss of past performance history
• Data Rights
Government is increasingly aggressive in obtaining rights to intellectual property
Proper compliance and management of intellectual property rights, including technical
data and computer software, is a must.
• Supply Chain Management
The proliferation of counterfeit parts and increased scrutiny over supply chain practices
is leading to additional consequences for government contractors that have not yet been
fully realized
The government’s expectations of prime contractors and higher tier subcontractors with
respect to the management of their supply chain has changed
Diligence Pitfalls
ERP System
Optimization
Configuration design &
implementation
Deltek Insight 14
• Cost Accounting Compliance / DCAA Audit Risk
CAS coverage triggers (if not previously covered)
Prior audit history
Cost accounting practice compliance status
Impacts to indirect cost rates, etc.
• Labor Law Compliance
Exposure to higher risk labor laws such as Service Contract Act (SCA) or Davis-Bacon and
related Acts (DBRA)
• Cybersecurity
Cybersecurity is at the forefront of diligence due to the world we are in, and security
issues can frequently arise, especially when there are new regulations to comply with.
• Federal Supply Schedule Risks
Existing compliance issues (OIG investigations, audit reports, Contractor Assessment
results)
Hidden issues – current disclosures, PRC / BOA tracking mechanisms, TAA etc.
Labor category harmonization
Diligence Pitfalls
ERP System
Optimization
Data migration
support
Deltek Insight 15
• Revisit Indirect Cost Structure for New Organizational Structure
Definition of a segment / business unit
Impacts to home office allocations and service centers
Additional or revised indirect cost rates
Organization design and governance considerations
• Cost accounting practice changes
Not all organizational changes equate to cost accounting practice changes
Assess need for GDM or cost impact
Revise disclosure statement as needed
• Consolidation of GSA Schedules / SINs / Labor categories
Streamline duplicative offerings
Implications of changing labor categories on business model and culture (i.e., customer and employee
retention issues)
• Consolidation / Revision of Business System Descriptions
Align business systems and compliance processes
Update policies, procedures, and system descriptions to reflect new organization
Consider business system changes and the impact on the business model and customer service process
• Notifications / Disclosures
Novations and Agency-specific requirements (e.g., DOD contractors with restructuring costs > $2.5M)
Post-Merger Integration – What Typically Happens?
Data migration
support
Configuration design &
implementation
Deltek Insight 16
• Gain understanding of systems acquired or divested
Is transition services agreement (TSA) in place?
What timelines, commitments, and accesses exist?
Number of user licenses included?
Which modules?
• Conduct health check of processes, people, and tools
Understand current state and target state
Understand architecture and tooling
What are capabilities of staff and vendors?
• Align stakeholders
Identification of stakeholders, including new investors
Coordinate with Integration Management Office
Socialize requirements and project intelligence
• Develop target state vision of org structure(s)
Define legal entities, both current and
Understand reporting, service and customer lines
Align business systems and compliance processes
Update policies, procedures, and system descriptions to reflect new organization
Preparing for M&A System Integration
Data migration
support
Configuration design &
implementation
Deltek Insight 17
ERP Integration – Common Scenarios
ERP System
Optimization
Data migration
support
Configuration design &
implementation
All Companies on Costpoint
• Integrate or Separate?
• OBS Design
• IWOs
• Compliance
• Reporting
• Business Process Changes
• Hosting
• Staffing
Acquired Company on Different ERP
• Standardization
• COA/OBS Design
• Data Conversion
• Compliance
• Reporting
• Business Process Changes
• Staff implications
New ERP for Parent Company
• Clean slate
• Data Management
• COA/OBS Design
• Compliance
• Reporting
• Business Process Changes
• Audits on Prior Years
• Staff implications
Deltek Insight 18
ERP Integration Phases & Key Activities
• Evaluate and deliver sustainable platforms (i.e. Cloud) for business apps
• Align functionality, capability and system roles with user base
• Establish lean and flexible organization structure and COA; avoid
complexity!
• Have reporting end goal in mind
• Implement structure and process for leading and managing culture and
operating practice transformation
• Prepare Executives & Steering Team Lead
• Define strategic objectives, including timelines and future acquisitions
• Define risk mitigation and governance strategy
• Workflow Workflows & Business Rules
• Integration System & Data Design
• Integration Process Design
• Systems Integration Execution
• Project Management
• Data Conversion & Analytics
Design
Process &
Tools
Align the
Organization
Strategy &
Planning
Deltek Insight 19
ERP Integration Phases & Key Activities (continued)
• Testing Strategy
• Product Training Documentation and Deltek Learning Zone (DLZ)
• Policies and Procedures
• System & End User Training
• ERP
• HRIS
• Payroll
• BI
• PMIS
• Project Controls/EVMS
• Contracts Management
• FP&A
• Monitor organization, function and process performance
• Create Post production support plan to transfer knowledge
• Roadmap Calibration / Address and mitigate barriers
Business
Optimization
Training &
Acceptance
Implement
• Support Client with subject and application matter expertise
• Execute additional trainings required and complete knowledge transfer to
business and IT
• Support SOP, WI, Process Flow updates
Post Go-Live
Support
Deltek Insight 20
• Poor Planning
No ERP and/or Compliance representation on deal team
ERP integration rushed due to corporate goals or M&A timeline
Not enough focus on target company’s system(s) and business processes: assimilation
vs. merger
• No Data Governance Plan
No identification of data flows, master data management plan; results in manual,
duplicate data entry of vendors and customers
Data conversion poorly executed; failure to leverage target system fully
No consideration for upstream and downstream systems or long-term plan for
scalability
Complexity in Org and COA structures; don’t compromise!
• Compliance
Indirect Rate structure design and cost allocation across divisions
Allowable vs. unallowable costs; impacts to commercial lines of business
DCAA, integration of policies and procedures
• Cultural Integration
ERP is an opportunity to gain organizational buy-in; poor execution is an opportunity
to harm integration
ERP Integration Pitfalls
Data migration
support
Configuration design &
implementation
Deltek Insight 21
BDO’s Integrated Approach to Change
Integration
Strategy
IMO/IPMO
Transformation Services
Process Design
Change Mgmt.
Systems Integration
Platform Costpoint ERP
Integration Transformation Systems Training &
Acceptance
Business
Optimization
STAKEHOLDERS Executives Steering Committees Finance & IT
Owners
End Users All
KEY ACTIVITIES Workshops Process Design Systems Analysis,
Design, and
Implementation
User Stories,
Training, Feedback
Continuous
Improvement,
Upgrades
KEY DELIVERABLES Integrated Project
Plan
Change Playbook Integrated,
Automated Systems
Policies &
Procedures
Calibrated Roadmap
Deltek Insight 22
Integration & Implementation Considerations
Future focused -- prospective view
of the organization taking into
consideration desired changes to the
organization, account and project
structures to meet business goals of
transparency, single source of truth,
improved efficiency and increased
organizational strength
Deltek Insight 23
Transformation Drivers
People First
Accountability
Embrace Change
Empowerment
Leadership & Culture
Alignment of People, Processes &
Systems
Consistent Messaging & Decision
Making
Clarity of Purpose
Team Alignment & Mission
Focused
Leadership Driven, Cultural
Assimilation
Deltek Insight 24
Serve as point-of-contact for Change and Adoption strategy and transition
Provide structure, tools and coaching to increase adoption and reduce resistance
Monitor risks to adoption and facilitate organization transition and readiness
Coach and Support Change Network
Identify, document, resolve issues
Develop templates and oversee the development of communication and training materials
Coach, Train and Support Project team, end-users and those affected by process changes
Help Prepare organization for change
Adoption Roadmap and Organization Change Management (OCM) Roles
Roadmap for Change and Adoption
Envision Future:
Strategy & Planning
Envision Future:
Team Creation & Governence
Envision Future:
Executive & Leadership Assessment
Prepare:
Change & Business Readiness
Assessment
Prepare:
Adoption & Communicatin
Planning
Support Adoption:
Training & Learning
Support Adoption:
Change Adoption
Transition to Normal: Post Go-live Support & Optimize Business
Practices
Deltek Insight 25
Integration & Transformation Objectives
Current State Operating Model
Integration and Merger Goals
Optimized Project
Implementation & Governance
New Org & Integrated
System
Effective Business &
Customer FocusSeparate Organizations
Deltek Insight 26
Transformation & Integration Lessons Learned
All Companies
on Costpoint
Acquired Company on Different ERP
New ERP for Parent
Company
NewCo
Realized Merger Goals
Deltek Insight 27
• Poor Planning
Accurate planning and review of current and future state
Effective evaluation process or testing process before each gate
• Ineffective Decisions Making
Timely feedback and decision making
Holistic and end to end review of impact for each decision
• Unattainable Timelines
Need to understand cadence and timing required to map out end to end integration points
Need time for risk mitigation and readiness planning and preparation
• Detached Processes
Planned, predictable, repeatable processes
People, processes, and systems aligned
Transformation & Integration Challenges
Deltek Insight 28
Transformation Best Practices
• Identifying leadership, pace and culture differences are key strategies for aligning and harmonizing
people, processes and cultures
• Understanding the scope of the changes required, involving stakeholders, engaging champions and
deploying sufficient resources are critical to the success of any transformation initiative
• Pay special attention to the following integration factors:
Pace/Cadence
Culture
Tailored Approach
Value Creation- Short and Long term
Planning, Resourcing, and Monitoring
Execution
Deltek Insight 29
M&A
• Include the right team of individuals with the necessary skillset
• Impress upon leadership the risks government contracts can carry
• Establish the integration plan, and revisit it often -focus on the value proposition
ERP
• ERP Representation in deal team
• Be strategic. Align ERP objectives with acquisition objectives (growth, rate efficiencies, new product lines)
• Focus on visibility, transparency, and grounding leadership in common reporting
Transformation
• Don’t rush. Plan for future integrations, data governance and scalability
• ERP is an opportunity to demonstrate success with integration. Don’t make a bad first impression
• Leverage industry experts to maintain a holistic view and drive desired results
Key Takeaways
Invest in Change Management
Deltek Insight 30
Questions?
For further questions please contact:
Jonathan Reynolds
Managing Director, ERP
Phone: 703-336-1674
Aaron Raddock
National Leader,
Government Contracts
Group
Phone: 703-336-1693
Kim Clark-Pakstys
Managing Director,
Transformation Practice
Phone: 703-770-9049
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