Relatively inexpensive capital, strong financial markets and pent-up demand contributed to robust M&A activity in 2021, with US deal value across 7,896 transactions reaching $2.6 trillion. But now, mergers and acquisitions face headwinds from global unrest, macro-economic forces and heightened regulatory scrutiny.

A recent report from global law firm White & Case and data provider Mergermarket says the latter factor in particular could dampen M&A activity for the second half of 2022. They predict more aggressive enforcement from the SEC, FTC and DoJ and greater scrutiny of foreign investments.

CFOs understand that the best way to win over skeptical regulators is complete, timely, trustworthy and accessible data. Generating the reports necessary to satisfy various three-letter agencies is much easier with the right technology. Good tech also helps get the combined organization moving forward profitably post-merger.

Yet few closely held companies have the systems in place to make deals happen smoothly and then support the acquiring company's strategy going forward.

“Organizations that are being acquired tend to be underinvested in technology,” said Matt Haller, principal at Bridgepoint Consulting, a NetSuite Alliance Partner. “They’re handling a lot of processes manually that could be automated, not only in the back office, but also across marketing, ecommerce, sales and other departments.”

Haller says companies looking to merge, acquire or be acquired should automate their operations to the greatest extent possible so they’re prepared to provide complete, accurate reports — and take off running when the deal closes.

One automation enabler is cloud ERP, which delivers four key benefits:

1. Assurance that the combined company will live up to expectations. Experts ranging from Bain to Wharton say 70% or more of M&A transactions either fail outright or don’t produce positive shareholder returns. All those cautionary tales combined with current economic angst mean strategic acquirers, private equity firms and special purpose acquisition companies (SPACs) are laser focused on value creation and risk avoidance.

M&A deals fail because of poor planning, poor execution or both.Companies with cloud ERP systems in place, or that adopt within 100 days of a deal closing, can close gaps that result from disparate business systems and manual processes.

For example, organizations often need help accurately measuring and reporting on financial performance, adopting common processes/controls and being proactive on investor relations. All of these are difficult to achieve using manual, disconnected solutions.

With a cloud ERP such as NetSuite as a foundation, companies and their advisers can zero in on an acquisition plan to discover where each party is now and exactly how a combined, post-transaction company will operate.

2. An ability to move fast. Time is always of the essence in M&A deals. With built-in best practices that support rapid implementation timelines, NetSuite SuiteSuccess allows companies to start leveraging technology quickly tailored to their sectors. The SuiteSuccess implementation methodology uses leading practices from various industries to speed up return on investment (ROI) while concurrently reducing the risks often associated with large IT projects.

In carve-out scenarios, SuiteSuccess allows the new entity to transition its existing software and data owned by the parent company to NetSuite within timelines typically dictated by a Transition Services Agreement.

3. Automation to remain lean. Cloud ERPs like NetSuite provide a foundation for making business processes more efficient without adding headcount. By effectively managing and automating a company’s systems — from financials to ecommerce to customer relationship management and beyond — NetSuite provides a tiered IT approach that’s easy to adjust as the company expands and explores new opportunities.

In fact, NetSuite can be a competitive differentiator, says Cari Thomas, CFO at Quatris Healthco, an Athenahealth strategic partner that emerged from a merger of Quatris and Healthco, which both used NetSuite before the M&A.

From an IT and finance point of view, NetSuite ensured everyone was working from the same KPIs and financials and could see the same, up-to-date, data. Thomas got the two companies transacting on the same system within six months and said this single view of financials, accounts payable and receivable, lead tracking, customer contracts and sales orders “differentiates it as a business.”

In fact, she sees the company’s technology stack as so important that she wishes it should be capitalized on the balance sheet as an asset for purposes of valuation.

“If we were doing M&A activity and someone was trying to evaluate us compared with a company without the [technology] infrastructure that we have built, it’s day and night,” she said.

4. Support before, during and after deal close. Before a deal can be structured, the purchaser completes thorough due diligence on various aspects of the transaction. When the financials all parties see are incomplete or don’t reflect current reality, that’s a red flag. Cloud ERPs like NetSuite enable all parties to have up-to-date reports appropriate to their roles.

NetSuite Alliance Partners like Bridgepoint can help PE firms, strategic acquirers and companies looking to enter into an M&A arrangement get up and running on cloud ERP quickly and can advise on both technology and operational best practices.

“A PE may need to quickly understand what NetSuite entails from a price and timing perspective,” said Rahul Puri, global head of NetSuite’s PE/VC services practice. “Bridgepoint is well equipped to address those questions.”

For a target company that has been using QuickBooks, for example, and needs a unified ERP, Bridgepoint can manage that implementation and all post go-live activities. A single technology platform plus a uniform organizational approach and processes can help a newly combined company beat those 70% odds.

Ready, Set, Go

As a NetSuite implementation partner that has supported many successful M&A integrations, Bridgepoint helps create value on all sides of the transaction. With a team of in-house CFOs and controllers, the partner understands what it takes to successfully navigate the highs and lows of an M&A process.

“We also have individuals on our team who understand what the control environment needs to look like for SPACs and IPOs,” said Haller. “That includes how companies can strengthen internal controls as they mature and prepare for those activities.”

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