In Accenture’s report, Merging M&A and cloud journeys, we highlight how technology “is a cornerstone of the long-term blueprint for any merger or acquisition.” That’s important to note since in the last year, the financial services industry has witnessed significant activity in M&A. And we expect this to continue.
Many organizations are turning to cloud technologies in these circumstances. In fact, some are combining their company’s cloud journey with their M&A journey. While there’s no one-size-fits-all approach, cloud migration within M&A does result in improved financials, better resource allocation and stronger security. It can also accelerate the merging of the businesses. Let’s examine two scenarios:
Acquiring a small target
If your organization already has a mature cloud program in place, and you’re acquiring a small target company, you can dramatically accelerate integration. You can shave months—even years—off the schedule by doing the following:
- Migrating the target company’s data and systems directly to your cloud platform.
- Taking advantage of economies of scale to lock in quick wins.
- Using strategic partners to help you plan a combined M&A and cloud journey.
In most cases, the target is moved into the acquirer’s cloud operating model because that is generally the simplest and fastest approach. We’ve witnessed a large US bank move most of its policy administration systems into the cloud to support accelerated integration of targets.
However, sometimes a multi-cloud strategy is more appropriate. For example, if you, as the acquirer, have an established Amazon Web Services (AWS) cloud operating model and the target is using Azure, the solution wouldn’t necessarily be to shut down one of them. You should perform an analysis to see which approach is more suitable—moving everything from one to another or using an integrated approach.
We recommend that you focus primarily on migrating data rather than applications to the cloud, considering the short timelines of most M&A initiatives.
Despite the numerous benefits of integrating the cloud journey during a merger with a small target company, it’s important to consider that the required upfront design and planning may be more complex. This will add time and cost to the acquisition. Evaluating your cloud migration opportunities against time and budget of integration activities will result in greater success.
Merger of equals
When you’re acquiring a target that is a similar size or larger than your own organization, you could face a scenario where the target already has a mature cloud program of its own.
While this might appear to make things more complex, it could actually boost your own cloud program and reduce integration timelines. Integrations like this can increase your buying power, driving down cloud costs and providing the catalyst for cloud adoption that was previously stalled by regulatory and market priorities.
As we see the merger of equals more frequently—BancorpSouth Bank with Cadence Bank in 2021 and BB&T Corporation and SunTrust Banks in 2019, for example—there are two approaches to consider when looking at cloud technology integrations: an adoption approach and a hybrid approach.
An adoption approach uses one of the organizations’ cloud operating models, while a hybrid approach takes the best of each of the cloud programs. Note, though, that hybrid solutions can take significantly more time to design and establish. In most circumstances, we advise that an adoption approach with one single model is the more suitable solution. While it may not be the ideal, it does help you to meet time constraints and other priorities.
For the merger of equals, we also advise:
- Continuing to revisit your cloud strategies as needed, while clearly defining cloud priorities and governance.
- Planning for cloud migration (and decommissioning) in support of synergy targets.
- Conducting estate dispositions early to feed into the cloud migration and decommissioning approach and planning.
- Dispositioning early to allow for more opportunities for application rationalization. (The dispositioning will help you phase your cloud migrations and align with merger timelines.)
- Identifying and retaining key cloud talent to help accelerate cloud migration in parallel with the M&A journey.
- Involving your Chief Technology or Information Officer early and often to make cybersecurity a top priority—as the cloud control framework will become critical.
We continue to see how cloud migration within M&A is beneficial. In each scenario, it’s necessary for you as the acquirer to evaluate and re-evaluate your cloud strategy. This will accelerate the merging of the organizations and provide the best foundation for a smooth, effective integration.
We look forward to hearing your thoughts or questions on the combining of cloud and M&A journeys.
To learn more, visit the Accenture website to download the full report, “Merging M&A and cloud journeys.”