Session Information:

Enterprise Architecture: A Key to Unlocking the Value of Acquisitions

In the digital era, mergers and acquisitions (M&As) can be especially rife with challenges. But with a relentless focus on using enterprise architecture (EA) to catalyze acquisitions, we can mitigate the challenges. In this webinar, the presenters look at the problem of acquisitive growth and reveal how advances in EA practices not only overcome obstacles, but also enable value creation.

Toppenberg and Henningsson, coauthors of Architecting Growth in the Digital Era, take you through a few case studies of Fortune 500 companies that grew through acquisition. They look at how these organizations were able to unlock value through the lens of the M&A leader, and also from the perspective of the EA professional. You’ll discover how EA catalyzed the acquisitions these companies made.

In this presentation, you’ll:

• Discover how EA can unlock the value potential of acquisitions without inducing long-term issues that will eventually force the acquirer to undertake a major organizational restructure.
• Learn how you can use EA during the different phases of an acquisition, including how to set up the company in preparation for an acquisition to avoid problems
• Learn how to draw on EA to orchestrate the strategic transformation that acquisitions entail in a way that reduces time-to-synergies and leaves fewer remaining issues to deal with after the dust has settled.

Session Transcript:

Hello everyone and welcome to enterprise architecture a key to unlocking the value of acquisitions my name is Gustav Toppenberg and with me today I have my good friend and colleague and uh research fellow Stephen Henningsson uh let's just jump right right into it we'll do a quick introduction first and then we'll jump into the material.

What you'll see here is the result of several years of both practitioner experience as well as research experience uh in the in the focus area of mergers and acquisitions a little bit of information information about me um i have been in uh the practice field of enterprise architecture and uh digital transformation in well over 20 years in larger and smaller firms and uh my myself and Stefan are doing consulting work with uh cut a consortium and as you can see as well.

So this presentation is in partnership with with them and we appreciate uh the uh opportunity to partner with them uh with myself as well as Stefan, you can find more information about the research that we've done um at the bottom and also some contact information uh Stephen uh would you like to introduce yourself.

Yes indeed so I'm Stefan Henningsson I'm professor at Copenhagen Business School in Denmark so I'm also a senior consultant with co with cutler um and uh my main research area I would say is emergency acquisition which I've been researching now for more than a decade and I worked with a bunch of large companies some some of them would be familiar with you.

Thank you Stephen the question we want you to think about in the next 30 or so minutes is your organization where is it at in the digital age and an increasing amount of digitalization across the world we're seeing it in in so many different ways how can you as a technology or enterprise architecture leader help your organizations grow and change and adapt to that change in particular in the context of mergers and acquisitions.

What we've chosen to call acquisitive growth one of the motivations for um for participating today is to share some of the insights and findings from the research and from practice as well we've also captured those in a book that was published earlier on in 2020 and we've called that architecting growth in the digital era it has lots of different case studies of companies struggling with succeeding with and overcoming some of these challenges but ultimately seeing some benefits large and small benefits from leveraging enterprise architecture in this process of acquisition from end to end and that's what we want to show you today and share with you today as well.

We welcome questions of course afterwards uh on all of the topics that we share today and we look forward to a lively q a to put this into context I'm going to spend a couple of minutes to to sort of unravel merchandise physicians challenge and what we think about it just to be able to to position ea and what it can actually deliver on here I mean we see a witness in the world that most night proceeds are going increasingly popular every year there are basically more of them and it seems to be a a better part of transforming at the speed of digital so when the world is moving faster when competition is moving faster then instead of focus on on internal growth and internal innovation increasingly companies need to rely on mergers and acquisitions and you do so to to strengthen your competitive power in in a range of way right.

It could be increased scale and scope for your offerings or to get unique capabilities to acquire a kick-ass innovation capacity to get a new business model going specific tech and talents or simply buying options for things that might happen happen in the future so the whole range of motors acquisition and that's part of what makes them so difficult because this is not a homogeneous routinized task.

You're facing it's more of a more explorative in the sense that you need to deal with a lot of different challenges going on but they do have something in common in particular the large ones where there's a lot of processes and people and technologies that needs to come together and this is the the key to many of the acquisitions and even though they're so important to motorcycles it's so popular truth is that most acquisitions fail to create value for the acquirer now on the acquiry read side is quite different i mean it's tend to be good for shareholders.

If your company get acquired but uh on the on the acquisition side the average value creation is around zero depending on how you map but there's huge variation within the span so i'm doing really well and so i'm doing really cool um but overall it turns out to be a very complex chance and one of the things that makes it so difficult is that there is a very very short time to bring these two companies together.

If you're in this world you have felt the pressure of time to synergy and time to market and to to realize the synergies and the reason is that because you make major investments in acquisition and if you delay that i mean the sort of interest you pay makes it a bad deal then you can't recover it so you really need to go to market and and realize the synergies cost significance revenue synergies as soon as you possibly can and that really puts a very high pressure on it on the on the integration phase on the other hand you can't start before you actually seal the deal and you can't start thinking about um an integration project until you actually know.

What you're gonna be acquiring because many times than multiple bitters there are legally legal reasons why you can't start so this means that everything is just cramped into this very very small space where you have to run a whole set of tasks at the same time so high complexity high time pressure and of course because you can't just bring in anyone to do this job you have to work with a limited set of people and and this sort of make the equation very difficult and the fact is that for most firms.

It doesn't really add up you they're more work to be done than you can possibly do within this small space so you go to simplifications um you go for the big big target and then you leave some synergies on the tables you do quick fixes but yeah that works but installs technical depth you have to deal with i mean down missed opportunities things you see during the process but you can't really change direction um you can't change the way you communicate to the to the market and say okay we're gonna delay six months to go for this um and of course there are delays as you have to push the that night further on uh and the result is that promising deals.

Do not create acquisition value that long-term performance issues are emerging in particular this is critical if you do a series of these things or other strategic needs that you mean every time you do something you're building a lot of a couple of inefficiencies and over time these complexities of add up to something where it's very very hard to to to move forward now so this is the the drama then and and where enterprise architecture really comes into play here is that well it allows us to increase the the speed by which we execute in this in the acquisition phase itself and it allows us to deal with more complexity and thereby.

We can handle major larger tasks within the selection and integration but it also allows us to push some of this stuff into the preparation sites of things that some companies would do by the time to seal the deal and an acquired company you can actually put into the preparation site about building a reputation about building connecting networks about documenting stuff and you can also move forward so that the inefficiencies the depth you created because of this i mean friends in short time gets documented and and also taken care of moving forward.

So that the next time you do an acquisition don't start from the poor state where you left the last one but actually uh return to a good position this is the overall value picture where we think that ea can come in i mean both to reduce the extended the product backwards to to sort of start before you know what you're going to acquire and execute faster and better and with higher precision and leaving less things on the table during the the acquisition soft and moving forward and you can clear the the depth so that you don't create issues for you moving forward.

So this is an overall picture um and and now we're going to hand over to Gustav to go into a little bit more depth on how EA can actually do so because it's easy easy to sell it's easy to sell but uh i can leave it for Bristol to explain a little bit on how this is going all right thanks Stefan as Stephen mentioned there are various different ways that EA can help um in the life cycle of mergers and acquisitions first of all as he just mentioned in the pre-acquisition preparation phase ensuring that the company is actually ready to acquire uh is very very important and a way for EA to with its capabilities help organizations help leaders think differently about the types of potential targets the types of potential growth opportunities or change opportunities that are ahead of them.

I'll go through the acquisition process here on the left hand side and explain a little bit more and then we'll get over on the the right hand side as well um going from pre-acquisition preparation to the process of acquisition selection this is where depending on the type of EA organization is in your company or the ea organization that you're leading you may have different ways of impacting um this process in organizations that we've come in contact with organizations.

That we've worked with and work for we found that certain ea organizations are actually focused very much on the business capability side and both the business model and the operating model and therefore because of the role that they play can help identify opportunities for acquisition targets and potentially also help identify areas of threats of resources as well how an organization that comes in and merges with the existing organization and potentially in certain cases we've seen companies where multiple acquisitions are all happening at the same time.

So this don't think of this as a linear process but think of it as a sort of multiplier effect that happens depending on how inquisitive or acquisitive i should say your your company is going into the acquisition integration stage itself which is where we see a lot of ea organizations already embedded either at the business level the operating level or the technology level this is where you can start to diagnose uh the implement and implementation of this integration mechanism as well so you can start to plan for knowing a relatively good version of your current state.

You can start to plan for the target state in various different ways and for all of the enterprise architecture professionals and leaders who are listening to this you'll know that there are multiple different ways and you can help what gets missed sometimes is ea's role in the post-integration continuation phase ea has a really important role even though it's always thought of as a strategic planning and strategic integration capability ea leaders and leaders in technology and in business who think like architects also have the ability to as that acquisition is happening and closing out multiple phases to do some level of performance assessment and address any inefficiencies or technical debt or non-technical debt created during that integration ultimately the acquisition outcome is of course um this benefits realization and understanding the organizational performance prior to during and after and again.

If you think about that idea that certain companies or some companies are actually doing this uh multiple times and overlapping as well um there is an iterative um nature between all of these different ones as well and so that's what you see there in the center on the right hand side we wanted to give you an idea of what we see as some of the components of an advanced enterprise architecture capability realizing that every ea group every ea leader is in a different space and so we'll talk about as well coming up is depending on where you're at on your journey there are different ways that you can impact your organization starting exactly where you're at but the um the path to a large degree of maturity is what's depicted here on the right-hand side.

So in terms of what we call qualities being fully engaged which means that you are partnering with and you are engaging in and you are seen as a leader who is at the table with a voice at the table that's what engage means you know some organizations will see themselves in different ways or some some some groups will see themselves maybe less engaged and holistic truly means that when we think about enterprise architecture it is the business models the ways of going to market the operating models all of the different processes and value streams that exist in an organization and then the uh the data the application the infrastructure all of those different layers to security layers is is all thought about.

When you think about uh an enterprise architecture organization and its um responsibilities and then capacities of course technology process and people and then artifacts solution models transformation models this is all the goodness that mature ea organizations have at their disposal but need to think about in a more consumable way think about the decision making that could be made with those solutions rather than just the creation process of them all right let's go uh forward to the to the next slide and I'll share a little bit about um how to position um uh acquisition through uh through EA.

So as we talked about before when we looked at the the earlier slide these acquisition possibilities are are identified uh then you start to define the acquisition scope you're going to figure out um how and why and to what degree you're going to acquire this company stand alone are you going to embed it you know why are you doing that and uh ea can help in terms of a lot of different areas as I mentioned on the earlier slide some of the ways.

We would encourage you to look at and we've seen in in companies is your infrastructure preparation and think of infrastructure really holistically as infrastructure you know clearly the um uh the the the legacy technical architecture is a big part of that so uh where's your data uh um managed how is your data managed which applications are going to be impacted um your current uh true technical infrastructure your networks and your your data warehouses and so forth um does this acquisition challenge or complement your existing plans and do you potentially need to to replan some of those there are lots of capability documentations.

That can be used here as well depending on where you're at those capabilities may be more technical or they may be more operational and business aligned as well there's a lot of different knowledge integration that you can complement this process with as well and then an important area is identify all of the gaps um as as people in organizations we tend to be at times myopically focused on the area of that company that we're part of and what enterprise architecture can help with you know particularly in a time of transformation is identifying those gaps that exist in terms of uh data transaction in terms of a customer journey or a value stream um or potentially in the security space as well so there are lots of different ways that you can help um from from an ea position.

Let's uh let's jump to the next one and I'll share a little bit more about this idea of um of of of engaged and how ea orchestrates uh and can orchestrate this strategic transformation as i mentioned when we looked at different organizations different uh ea groups within organizations we found that there were sort of four different archetypes and and it's on um uh on the uh on the on the x-axis it's uh split between sort of is the ea organization focused mostly in the technical domain or does it also include the organizational domain and by organizational domain.

We mean again the business models the operating models sort of the front end of of the business as well and then um on the on the y-axis we talk about a decoupled or or truly engaged by decoupled we mean that the ea organization may exist um and if it exists it's a very sort of traditional um [Music] organization or group that partners with but is seen separately from a lot of the strategic decisions but in the engaged model you see the ea organization sitting very close to you know certainly in the technical domain the cio the cto or the chief digital officer or even the chief data officer as well and is thought of as a thought partner in this process as we move over to the organizational domain um we i i mentioned before this idea of this advanced ea capability.

That's where it's both advanced and holistic as well you may find yourself in in one part of these four archetypes and um i would encourage you if you see yourself in one area first of all to think about the value that you can add right where you're at this day today if you're finding yourself in a in a mode of transformation and even if it isn't acquisitions mergers and acquisitions you likely have some ways of impacting currently and then deciding what's the next step on your journey are you moving perhaps from the technical domain in a very traditional va organization up towards being more actively engaged you're going to partner closer with the IT leaders are you going to be moving more over to the right potentially and recognizing that you may not be fully engaged with a voice at the table but you want to impact more directly the organizational domains as well or do you want to be aspirational and move from the traditional to the advanced as well.

We've seen organizations or teams that have done that as well and have found sponsors and leaders who can see the value of enterprise architecture but need the demonstrated use cases and and that ea organization is given the chance um as well on the right-hand side this is what we recommend you to do you know you understand your current state likely very well from a technical standpoint or again from an organizational and technical standpoint start to think about what are the acquisition needs what are the acquisition drivers how is that happening and help to transform that action plan uh maybe even come with some recommendations.

Even if you aren't asked to participate ask you know come come ready with some recommendations and help build that uh that action plan um let's jump to the next one um so this is looking at you know once you're in this space of the enterprise architect and you're looking at all of these different capabilities that you have these artifacts these these capacities that you have how can you help to connect uh the dots again either you're invited to participate in an active role or you may be thinking hey there's an architectural match that really nobody is talking about this is your sweet spot you can start to look at the organization uh currently the acquirer and the acquiree and you can start to almost like a reference architecture.

You can build out a research or for your company and start to look at potentially targets and try to understand what's the architectural match or mismatch in all of these different resources again depending on what your purview is you could start with a technical the reality is that many organizations miss the value uh capture because of the technical side so you already have an incredibly important role to play um so that would be one of our recommendations it's that's a a relatively straightforward way to start looking at this again.

If your organization has already acquired you could go back and look at at that point in time of the acquisition what were the matches and mismatches and use that as a way to move the conversation forward in terms of your role all right let's let's move to the next one all right so we're here we've shared some different ideas we've shared some thoughts with you in terms of why acquisition mergers and acquisitions are important why they're difficult and some of the ways that ea can add value so if you're with us to this point in time and you are committed to moving forward in one larger or smaller way.

These are some ways that we recommend that you start making a case for ea ea's engagement in in acquisitions start to understand some of the pain points um as we mentioned before those pay points may arrive in the mass match for mismatch of capabilities in identifying targets um start to understand who owns those problems and where the problems existing prior to the acquisition during the acquisition or post the acquisition as well and what are some of the value principles of your organization and and how can you start to address the pain points with the problem owners and and really figure out how to drive that value forward in terms of what your organization thinks is important once you understand the interplay and interchange between all the all three of them.

Then you can look at to what degree is ea mandated to perform and to what degree is the potentially the acquisition team mandated to perform you can start to build some basic capacities in your organization you can start to address some of those pain points and start to learn and then figure out how are those applicable um to the acquisitions that are either taking place in partnership with potentially your cio your cto or your co or CEO as well depending on your purview and then you can start to unlock some of that value that we've talked about being being missed many times that in turn with your um increased participate participation will increase the mandate to perform and we've seen this this this rotation um spin faster and faster when um organizational leaders.

See that you have some real value to impart one of the things I would encourage you to do as well is not stopping short of just relying on yourself and your team to be thinking about enterprise architecture and architectural thinking but transfer some of that knowledge onto those leaders so they're always thinking about it whether or not you're in the room or not all right so that's what we had to share with you um today uh there's a couple of lessons learned that we wanted to ensure that you took away uh and some just some uh some reality checks uh murders and acquisitions are absolutely key to um you know reaping benefits of of transforming digital economies um more and more and increasingly.

So we're seeing small and large organizations using this as a capacity and capability to move ahead of many of their uh competitors um this reactive sort of victim to circumstances approach to mergers and acquisitions value realization leads to uh not only suboptimal outcomes but but sometimes potentially detrimental outcomes as well and um acquisitions that have really good intent and and really good potential value uh potentially not only uh captures no value but actually destroys value as well so this is where you as an enterprise architecture leader as an enterprise architecture team can come in when you start to help purposefully manage this acquisition process by thinking ahead by being less reactive and more proactive in your acquisition processes and then also how you manage the technical and non-technical debt as well as how you think about the performance as well so to fully leverage ea um we believe that this holistic and engaged set of qualities are critical again there's a lot more information and we'll share with you some points of view or some some points of reference here the book of course is there as well and we encourage you to reach out to either of us or both of us and we can go into a lot more detail on on these different areas the the most important thing is um all ea capabilities again no matter what role you play no matter who you are no matter what your ea organization maturity is start.

Where you're at today the capabilities that you have today become the fertile foundation for you to grow your importance and impact on mergers and acquisitions and they can all be leveraged in some way before we wrap up today uh and do some q a um we want to share with you some different ways that ea and that we've helped organizations with as well so if you're thinking in terms of hey where do i take this next what's an activity.

That I can start with IT integration in the readiness assessment helping to prepare and think proactively about the application landscape you likely have a lot of that information already building potentially an it integration team you can start with a virtual team as well if there isn't the organizational appetite yet to to create an it integration team um engaging enterprise architecture in the orchestration of IT transformation in general.

So if that isn't part of what you do currently executive coaching as I mentioned imparting some level of architectural thinking is important and then doing industry research and benchmarking your participation today is is part and parcel of that idea all right uh last but not least um as promised here are some different ways to take what we've shared today and continue the learning process.

We've published a few uh cutter articles of course as well as all the other research and uh and insights that we have in general but here are some of the cutter articles in the archive and uh we also do offer up help of course as well um through cutter uh to um to to help people like yourself so here's a link if you're interested in that as well and with that I want to thank all of you for participating today I want to thank the staff and as well for being uh my uh my co-presenter and for being a great friend and colleague through so many years.

Thank you again thanks.