cp-102€¦ · erp system optimization data migration support configuration design &...

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

[email protected]

Direct: +703-336-1674

Mobile:+571-205-5757

AARON RADDOCK, CPANational Leader, Government

Contracts Group

[email protected]

Direct: +703-336-1693

Mobile:+203-912-1281

Introductions

KIM CLARK PAKSTYSManaging Director,

Transformation Services

Practice

[email protected]

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

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Shape of the Deal Market

• Market Forces

• Recent M&A Transactions

• Trends

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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


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

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ERP System

Optimization

Data migration

support


implementation

Corporate Strategy

Identifying Parties



Change Management

Definitive Deal

Documents


The M&A lifecycle


from ordinary Due

Diligence to ERP

systems

integration

Deltek Insight 8


ERP System

Optimization

Data migration

support


implementation

Corporate Strategy

Identifying Parties



Change Management

Definitive Deal

Documents


The M&A lifecycle


from ordinary Due

Diligence to ERP

systems

integration

Deltek Insight 9


ERP System

Optimization

Data migration

support


implementation

Corporate Strategy

Identifying Parties



Change Management

Definitive Deal

Documents


The M&A lifecycle


from ordinary Due

Diligence to ERP

systems

integration

Deltek Insight 10


ERP System

Optimization

Data migration

support


implementation

Corporate Strategy

Identifying Parties



Change Management

Definitive Deal

Documents


The M&A lifecycle


from ordinary Due

Diligence to ERP

systems

integration

Deltek Insight 11


ERP System

Optimization

Data migration

support


implementation

Corporate Strategy

Identifying Parties



Change Management

Definitive Deal

Documents


The M&A lifecycle


from ordinary Due

Diligence to ERP

systems

integration

Deltek Insight 12


ERP System

Optimization

Data migration

support


implementation

Corporate Strategy

Identifying Parties



Change Management

Definitive Deal

Documents


The M&A lifecycle


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


implementation

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• 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


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


implementation

Deltek Insight 17

ERP Integration – Common Scenarios

ERP System

Optimization

Data migration

support


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


• Staff implications

New ERP for Parent Company

• Clean slate

• Data Management

• COA/OBS Design

• Compliance

• Reporting


• Audits on Prior Years

• Staff implications

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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


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

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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

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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

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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

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Questions?

For further questions please contact:

Jonathan Reynolds

Managing Director, ERP

[email protected]

Phone: 703-336-1674

Aaron Raddock

National Leader,

Government Contracts

Group

[email protected]

Phone: 703-336-1693

Kim Clark-Pakstys

Managing Director,

Transformation Practice

[email protected]

Phone: 703-770-9049

mailto:[email protected]



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