Duro Bag was once a small, family-owned paper bag manufacturing business with traditional IT needs. After being acquired by a private equity firm, a new entity was created called Novolex. After a flurry of acquisitions, Duro quickly became part of the largest paper bag producer in the world with nearly 2,000 employees and billions of dollars in revenue. The CIO and Director of IT suddenly found themselves in charge of the IT infrastructure for an organization that was no longer a small manufacturing company, but instead a billion-dollar enterprise with multiple subsidiaries, and more coming on board.
“There is no way they had enough excess capacity in the original company to merge all the acquired IT systems together,” says Matt Scherocman, President of Interlink Cloud Advisors. “They had to go to the cloud because they couldn’t possibly move fast enough to build servers and infrastructure, to be able to consolidate the firm’s IT systems.”
By now, most business leaders recognize the benefits of the cloud – flexibility, scalability, reduced capital expense, increased security – but cloud technology, particularly Microsoft Azure and Office 365, is playing an increasingly crucial role in the mergers and acquisition (M&A) space.
“We’re seeing a lot of M&A activity today, especially with private equity investors purchasing smaller companies,” says Scherocman. “Private equity companies are usually looking at a five-year ownership cycle. They’ll acquire similar companies quickly, leverage synergies quickly, and then look for new owners who want to continue the growth journey.
Takeover activity in 2016 was the third largest on record, with $3.7 trillion in transactions. The frenzy promises to continue as firms look to grow by consolidating sectors and taking advantage of attractive interest rates.
Bringing two organizations together presents a host of issues in operations, sales & marketing, finance, and HR. But one of the most critical components to the success of integrating a new acquisition involves IT. Technology integration challenges can expand exponentially. A single error in strategy or tactics can cascade through multiple instances, and significantly increase costs, as well as create delays.
Microsoft Office 365 offers a suite of applications that gives users the productivity and collaboration tools they need during, and after, a merger or acquisition. Delivered as a cloud service, you can rapidly modify Office 365 to meet your particular M&A challenges.
“M&A can be challenging and confusing when it comes to merging systems,” says Scherocman. “Using Microsoft cloud-based technologies not only helps you solve those problems but also provides an opportunity to take advantage of cloud resources to address many of your other IT challenges at the same time.”
Office 365 is an efficient way to bring employees up to speed and scale your technology investments to match your needs. With Office 365 you never have to worry about adding servers or storage to account for the additional requirements of the merged organization. Microsoft manages the infrastructure freeing you up to manage other key aspects of the consolidation. Most importantly, you only pay for what you use.
Following a merger or acquisition, you need to act quickly to identify IT goals, develop an integration plan, and combine the data of the separate entities. You also need to target ways to build value today through IT, while simultaneously planning to meet the goals of tomorrow.
Scherocman stated, “most private equity acquisitions are justified on an accelerated time horizon, typically five years.” That’s a short timeline in business. The investors are moving fast, and when you’re moving fast, you better have a good plan to get your IT stuff together.”
Accomplishing that while in the middle of the upheaval that is a typical M&A scenario, is nearly impossible. Partnering with a qualified integrator is the best way to meet the quickly changing needs.
“If you’re an IT organization going through an M&A, step one is to go get help,” says Scherocman. “Step two is to get help from somebody who does this work all the time. You don’t want someone learning on your dime. You want it done right. The cost to get help is cheap compared to botching it all up.”
The Interlink M&A strategy identifies the optimal cloud solutions for integrating the IT infrastructure, processes, and environment of the merging entities.
“Every system integrator does M&A work,” says Scherocman. “But Interlink is the only one I know of that is doing so much of this work, that we’ve developed our own methodology and expertise around it. Our tested, AcquisitionLink assessment methodology helps you determine if the company you are acquiring is cloud ready, or what it would take to get them there. We evaluate the actual cost of upgrading IT assets while defining the cost and time savings you’ll realize once you migrate to the cloud.”
The benefits of partnering with Interlink include:
“Going through an M&A can be painful for an IT group,” Scherocman sums up. “But we’ve found the cloud to be a great point of consolidation for our customers because of the flexibility and scalability. Working with the right partner and leveraging Microsoft technology can help you overcome the many challenges you’ll face.”
Source: M&A Activity in 2016: What it Tells Us About the Economy for 2017, by John M. Mason, Seeking Alpha, January 3, 2017.