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This two-part blog series aims to offer strategic guidance and principles to stakeholders involved in Mergers & Acquisitions (M&A) regarding M&A Cloud Centers of Excellence (CCoEs). In this first installment, we introduce the concept of the M&A CCoE. The second part will delve into specific roles and responsibilities within these centers. Although this series is written from the perspective of a buy-side entity, the principles and best practices discussed can apply to a variety of M&A or customer scenarios. While many organizations may already have a M&A Integration Management Office (IMO), this series emphasizes key considerations for establishing a cloud-specific branch of an IMO. We aim for these insights to assist organizations in maximizing the value of their cloud investments.
Understanding CCOEs and Their Importance in M&A
Organizations across various industries are enhancing their success in the cloud by setting up Cloud Centers of Excellence. CCoEs are instrumental in implementing a well-defined enterprise cloud strategy, assessing the effectiveness of cloud initiatives, and influencing C-level business and technology objectives. Companies like Zendesk, Crayon, and Astro have successfully leveraged CCoEs. Building on this success, Amazon’s Mergers & Acquisitions Advisory has introduced the Mergers & Acquisitions Cloud Center of Excellence (M&A CCoE). This initiative aims to address common cloud challenges associated with M&A transactions.
Entities engaged in M&A often encounter difficulties related to cloud technologies, whether they’re on the buying or selling end of a transaction. The complexities of merging Information Technology (IT) organizations, application and infrastructure stacks, and technology processes can pose risks to both pre-close and post-close planning and execution. These risks could become obstacles to realizing the value of the transaction or capitalizing on the investment. As a purchasing organization formulates its deal thesis and synergy goals, it must also strategize how its technology plan aligns with its expected transaction outcomes. A deal thesis is the strategic rationale behind an M&A transaction, outlining how it will deliver value to the organization.
Common cloud-related challenges that arise during M&A transactions include:
- Variations in cloud maturity and skills
- Differences in IT responsibilities and infrastructure philosophies
- Lack of executive or managerial understanding of the cloud’s role in M&A
- The newly merged organization’s grasp of its acquired technology stack
- Alignment on “Deal Thesis,” “Deal Rationale,” and “Synergies”
One effective approach to navigating these challenges is establishing a Mergers & Acquisitions Cloud Center of Excellence (M&A CCoE). The M&A CCoE is a dedicated, cross-functional team that serves as the primary cloud authority during an M&A transaction. This team acts as subject matter experts, guiding the organization in developing best practices throughout the M&A process. Furthermore, the M&A CCoE facilitates repeatable processes, manages change efficiently, and ensures that expected deal synergies are achieved swiftly. The goal is to shift the perception of cloud technology from merely a method of IT procurement to a crucial enabler of transactions and revenue.
Principles and Considerations for M&A CCoEs
The M&A transaction lifecycle generally unfolds in three phases: pre-transaction, pre-close, and post-close. Below, we outline key considerations for the M&A CCoE during each phase.
During the pre-transaction and pre-close stages, the buying entity establishes and enforces an M&A Cloud Center of Excellence (M&A CCoE). Once alignment on the overall M&A strategy is achieved among executives and IT, the M&A CCoE leads the planning of cloud-related tasks.
Team members of the M&A CCoE typically include executives from IT, Enterprise Architecture, Security, Finance, and Corporate Development, focusing on cloud-specific value realization and risk mitigation throughout M&A activities. This CCoE can integrate into an existing CCoE or be developed specifically for a single M&A transaction. It can also become part of an existing M&A IMO or function as an independent entity within the corporate structure. The M&A CCoE serves as a thought leader and educator for stakeholder teams, including IT integration, security, compliance, and finance.
Essential elements of the M&A CCoE should include:
- An enterprise architecture function to establish standards for architecture, security, governance, and compliance concerning IT integration.
- Cloud diligence activities, such as cloud security risk assessments and cost optimization evaluations.
- Assessment of the target IT organization’s cloud skill set, including strategies for personnel integration and cloud training post-close.
- Key performance indicators (KPIs) and metrics to measure the success of cloud tasks and their contribution to synergy realization. This information is crucial for resource allocation during M&A planning and demonstrates the value of IT teams.
After the due diligence phase, the M&A CCoE drafts an M&A Cloud Operating Model (COM) and post-close Integration Plan. This plan is developed by collaborating with M&A stakeholders, working backward from due diligence findings, anticipated synergies, and the deal thesis. The M&A CCoE team also creates cloud integration playbooks for stakeholders to follow during the post-close phase and collaborates directly with Infrastructure and DevOps teams to establish standards, policies, and practices for cloud M&A integration tasks. This includes educating teams on how to architect an efficient and secure M&A well-architected landing zone in line with the buy-side entity’s governance standards. This landing zone will serve as an operationally sound cloud environment, allowing the acquiring entity to inherit the target IT estates smoothly.
In the post-close phase, the M&A CCoE advises M&A IT Integration teams on best practices for cloud integration, tracks cloud tasks, and prioritizes actions while providing thoughtful leadership on these critical processes.
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