Blog

Jumpstart Growth Through Acquisitions

Author: Chris York

The Challenge: Rapid integration of acquisitions leveraging SAP Central Finance 

By now we all have heard the term Digital Transformation. I often hear clients commenting that the reality is more difficult to achieve than the vision painted in articles. I would have to agree with that assessment. The vision many companies have is forward-thinking, but the transition is challenging. The cultural change required for transformation cannot be underestimated. 

Transformation is critical for those companies who wish to maintain or gain market leadership. One critical factor for growth in most industries is acquisition. Many of our clients actively seek out acquisition targets of 3 or more companies each year. Hypergrowth businesses recognize that expanding business models and diversification protect them from market downturns. Many of the target companies are holdings of larger companies. This situation results in an aggressive timeline to decouple the acquired company. The parent company wants the divestiture out of their systems and infrastructure.  This integration process falls to Supply Chain, Human Resources, and Information Technology. 

Transition Support Agreements (TSAs) spell out the details of the infrastructure and systems that will be provided. This sets up an aggressive timeline to either implement new systems or integrate the company into the new parents’ systems. This integration process is where the challenges begin. Our experience is that aging Enterprise Resource Planning (ERP) systems were designed for the business model in place decades ago. That core business has complexity interwoven into the sales, contract, and invoicing processes. This complexity results in barriers to adding new offerings in products, services, or subscriptions when acquisitions are a core part of business growth. The result is a compromised integration. 

Resulting options are either operating independently and inputting a series of journal entries into the parent company’s ERP or combining the “numbers” externally for reporting purposes. Neither of these is ideal. It can take years of struggle to report financial results before a solution can be implemented. For companies that choose SAP S/4HANA as their core ERP system, there is a much easier path forward to integrating each new acquisition.  

Ameri100 and SAP have developed two approaches to provide rapid integration of acquisitions. The first option is a “light” integration using SAP BPC (Business Planning and Consolidation) and is not real-time. It is a once a month process that is done after the subsidiary has completed their month-end close. The second option is SAP Central Finance. This option results in real-time accounting document creation within S/4HANA. This provides instant recognition of the performance of the new subsidiary. Often times, our clients combine the options and use BPC initially until the Central Finance option can be completed. 

Option 1 leverages BPC for consolidated financial reporting. BPC has a unique feature that allows an external system to drop a file extract in a “landing zone.” The file is automatically interfaced into the BPC consolidations module. This brings common financial reporting across all lines of business. This option works well for many clients who are “SAP centric” because they often have BPC in place for business planning and forecasting. The approach would be to model the consolidated reporting, map the file format into the report, and create the extract program from the subsidiary’s ERP. The consolidated reporting format should be reviewed and approved by finance leadership. Once the reporting format is finalized the file mapping will ensure the input file data elements are placed into the correct fields in the BPC data tables. Ideally, the report and file format and mapping will remain fixed which minimizes the time during subsequent acquisitions. Each new acquisition would create an extract from their ERP in the predefined format that would be triggered each month after the period close process has been completed. This option would typically take 3-4 months with a team of 2-3 people. 

The second option yields real-time integration for all financials. This allows full financial visibility without having to add new business models into the existing S/4HANA system. In simple terms, Central Finance uses SAP’s SLT (System Landscape Transformation) server to map, transform, and duplicate relevant data between the external system and S/4HANA. If that external system is an SAP ECC system, then Central Finance provides real-time synchronization as well as “drill back” capabilities. Drill back gives the finance team the ability to look at an accounting document in S/4HANA finance and follow the document flow back to a purchase order, sales order, or other transactional documents just as though it were in S/4HANA. This option would typically take 6-9 months with a team of 2-3 people. 

You may have noticed I haven’t addressed the implementation of S/4HANA in this post. I am assuming you have S/4HANA in place. If you don’t have S/4HANA yet, that approach is also part of our road map. We have a white paper written that considers clients in just your position and spells out that approach in detail. All of the options we have developed are designed to reduce risk and deliver transformation at the speed you desire. 

What is your vision? If you can imagine where you want your company to go, Ameri100 has the business acumen and S/4HANA expertise to make it happen. For more information on Central Finance fill out the information below, and we will share our white paper “Ameri100 Central Finance Roadmap.” Check back soon for more posts on Central Finance or subscribe to receive weekly updates.

About the Author

https://ameri100.com/leadership-slug/chris-york/