SAP Solution Brief SAP Services System Landscape Optimization

REALIZING MERGERS, ACQUISITIONS, AND DIVESTITURES AT IT LEVEL

BENEFITING FROM A SMOOTH ADAPTATION OF YOUR SYSTEM LANDSCAPE

Changing markets and challenging business situations call for new ways to cut costs and optimize business operations. Companies are seeking to improve business value via mergers, acquisitions, and divestitures, which require the full adaptation of the IT landscape to reflect the new organizational structure.

Increasing globalization and the need for market agility demand that companies constantly adapt their portfolios to ensure sustainability and growth. Whether they are pursuing market leadership, hoping to leverage synergies across an installed base, or looking for economies of scale, many companies engage in mergers, acquisitions, and divestitures to foster growth and the promise of huge benefits and gains to shareholders. As a result, many companies are searching for ways to quickly and cost-effectively adapt their current IT landscapes. When an enterprise adopts a more proactive and marketoriented strategy, several business scenarios may arise: Acquisition of a new business Divestment of a business unit or a company Internal reorganization for divestment preparation such as: Setting up a business unit as a separate legal entity Moving production to another factory Introduction of shared-service centers In order to execute such demanding business objectives, companies need to implement a global enterprise strategy. It is extremely important to provide visibility into the impact of a merger, acquisition, or divestiture on the enterprises IT system landscape. Furthermore, it is important to create awareness of all the necessary changes to organizational structures and processes. Each change scenario implies tremendous business changes and technical adaptations. Moreover, data security, legal compliance,

and operational efficiency are critical success factors for changing business transactions.

Improving Business Value Through Suitable IT Integration

IT plays a major role when it comes to the realization of mergers and acquisitions (M&A) and divestitures. M&A projects offer numerous rewards but also involve possible financial risk. While a wellplanned and suitable approach to IT integration improves business value for a company, poor IT integration can lead to operational malfunctions. For example, disruption to daily business can cause production outages or delays in order processing. Ultimately, success depends on your companys ability to meet all predefined business requirements and handle the IT implementation effectively. During the planning of an M&A or divestiture project, the overall adaptation and alignment of the IT landscape is a key priority for the companys business operations. In order to qualify and decide on the best IT approach, you need to understand your IT options. A premerger assessment can help you come to the right decision. Furthermore, it will help business to fully understand all IT requirements such as data-related business rules, processrelevant limitations, master-data management issues, and the integration-driven factors that may jeopardize successful data integration. Moreover, the assessment presents an estimate of costs, a realistic definition of planned objectives, a clear assignment of resources, and a detailed plan entailing all IT activities.

Based on this preparatory work, you are then in a good position to determine the best strategy for your company. However, different strategies require different solutions. The most common approaches for postmerger integration are the complete merge of the buyers and sellers system or the migration of selected data from the acquired companys system landscape into the target landscape. In the case of divestiture projects, strategy options for the best fit include single-system, two-system, and reporting solutions.

Scenario for Realizing Mergers and Acquisitions Due Diligence Analysis Preparation Integration Planning Blueprint Mirror to IT

Optimizing Your Companys Business Processes

The complexity of integrating a newly acquired business requires a suitable solution at the IT level. For postmerger integrations, different options may apply. Those options comprise a client transfer (resulting in a multiclient system), a client system merge (resulting in one central system), and the transfer of selective business objects (objects that embody data for particular business transactions such as sales orders). By using different data migration technologies in combination with standardized methodologies and best practices, SAP experts can help to realize your integration objectives. The SAP experts can help you create a flexible multiclient system landscape by transferring clients from multiple source systems into a dedicated target system. In fact, a client transfer project may be the answer to your companys requirements for simplification. Moreover, this approach can be seen as a preparatory step toward establishing a single-client system with standardized and uniform business processes containing all historical data from all the source systems. For projects relating to divestitures, the System Landscape Optimization group can support various scenarios. By starting with an assessment of the divestiture strategy, the project team can select the most suitable IT approach. Depending on your business scenario, the SAP experts can deliver a fully automated service for example, to transfer a company code or apply a tailored solution such as splitting a business area.

Minimizing Risk During IT Project Realization

During the realization phase of an IT integration project, the involvement of all functional departments is essential to ensure seamless interaction with IT and to support a smooth integration of all applications currently in use, such as controlling, sales and distribution, and production. To achieve your target scenario, your company will need to fully integrate the recently acquired business into your overall corporate structure. This challenging undertaking might require numerous efforts to harmonize data, including the local chart of accounts, customer numbers, product hierarchies, and changes to your fiscal year. In light of a redefined corporate target structure, controlling areas, company codes, plants, and sales organizations need to be changed or reallocated in your SAP software system. In case your group is planning to divest a company or part of one you need

Acquired business

Existing company structure Realization Consolidate Restructure Harmonize and Unify IT Landscape

Figure 1: Scenario for Realizing Mergers and Acquisitions

to understand and estimate different IT divestment strategies. Depending on your current divestment scenario, you may need to carve out data at the plant or company code level. At the outset of the project, you need to identify and select all relevant master and transaction data to meet your split requirements and to transfer related quantities and values such as those for stocks and assets. The System Landscape Optimization group from SAP Consulting with its broad service portfolio covering numerous business situations and enabling you to safeguard all historical data can help you select the best approach to the divestiture.

Complementing Projects with Information Lifecycle Management

Company A

Corporation Company B Client 200 0800

Acquired business Company C Client 300 1900

In a traditional integration project, an optimal level of data quality needs to be achieved to ensure process continuity. However, many M&A-related projects not only result in greater system complexity but can also inherit unstructured data from legacy systems. Running legacy systems poses higher risks in the areas of hardware incompatibility and system reliability. In addition, legacy systems often demand more administrative effort and resources. One of the main reasons for this is that governments and tax agencies mandate that certain data be retained for a specific duration. In order to proactively reduce total cost of ownership and minimize risk, the System Landscape Optimization group provides a uniform methodology and technology for implementing the SAP NetWeaver Information Lifecycle Management component. On the basis of a well-defined archiving solution, companies can benefit from improvements through the introduction of retention rules and data policies. The system decommissioning component of SAP NetWeaver Information Lifecycle Management not only helps you to extract auditing-relevant data prior to system retirement but also supports on-demand reporting via its business warehouse functionality from the decommissioned system.

Client 100 0700

System 1 Company code split

System 2 Company code transfer

System 3 Harmonization of naming rules Plant reallocation

Corporation after successful IT integration Client 100 0700 0710 Client 200 0800 Client 300 0900

New system X
Figure 2: Corporate Landscape Before and After IT Integration

in more than 2,500 migration, harmonization, and consolidation projects worldwide. During these projects, the group has provided a high degree of standardization combined with flexible adaptation to meet companies special requirements. For all the services the SAP team delivers, its experts use proven methodologies, tool-based technologies, and standardized methods to deliver the best solution. For the multifaceted demands of M&A and divestiture projects, there is no one size fits all approach. An up-front strategy assessment is the ultimate key to meet all customer requirements. The clear picture of the transformation initiative that results from the assessment helps cover all IT-related problem areas and enables the System Landscape Optimization groups experts to operate

on a flexible and secure technological platform. The System Landscape Optimization group offers a full range of service offerings addressing customers transformation requirements. The dedicated team of experts from SAP Consulting will set up a design catalog to characterize your future business scenario. Multiple feasibility checks, an in-depth performance analysis, and an initial assessment help ensure that a project can be completed on time and within budget.

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To learn more about the System Landscape Optimization group, call your SAP representative today or visit us on the Web at www.sap.com/services/slo.

Leveraging SAP Experience During M&A-Related IT Projects

Over the last 14 years, the System Landscape Optimization group has engaged

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Summary Ever-changing markets and volatile economic conditions demand corporate action and business flexibility. In response to the challenging business environment, companies often initiate mergers, acquisitions, and divestitures to help enhance market position and increase overall business value. It is essential to fully adapt the IT landscape in order to reflect a companys new organizational structure. The services provided by the System Landscape Optimization group of experts from SAP Consulting help you to integrate a new acquisition or divest parts of your company. Business Challenges Integrate new acquisition and simplify existing system landscape Meet legal and business requirements regarding data retention Execute different IT divestment scenarios quickly and cost-effectively Key Features Initial assessment of individual technical integration or approach to divestiture Proven methodologies, tool-based technologies, and standardized methods Scenario-based and comprehensive services for acquisitions and divestitures Business Benets Sustained, undisrupted business operations due to experience and know-how of SAP experts throughout realization phase Reduced maintenance and project costs thanks to intelligent use of services and careful design of target landscape Minimized risk and ensured legal compliance via System Landscape Optimization groups service offerings For More Information To learn more about the System Landscape Optimization group, call your SAP representative today or visit us on the Web at www.sap.com/services/slo.

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