By Andy Baillie, below, VP, UK and Ireland, at Master Data Management (MDM) specialists, Semarchy
Mergers and acquisitions (M&A) activity is predicted to surge in the remainder of 2024 – and with that, the spotlight is once again on effective data governance strategies. And for good reason. Because while M&A offers huge growth opportunities, a massive 70-90% of deals fall short with overlooking data governance often being a crucial factor in that.
Proper data management can mitigate these risks and improve the chances of M&A success. Unsurprisingly, the opposite is also true: poor post-merger data-governance planning can have severe and far-reaching consequences. Specifically, merging diverse data sources without proper planning can lead to fragmentation, causing inconsistencies, duplication, and access issues across the business. You’ll find it much harder to make important decisions, and to action them, as a result.
The risks of poor planning
I’ve already touched on a few of the risks of poor data management when it comes to post-merger integration, from fragmentation to the increased chance of muddled thinking and inefficient actions being taken.
But when considered as a whole, there are multiple risks that need to be avoided. Take, for example, the idea of suffering data loss or corruption during migration. This is bound to have an impact on how you manage your business operations – both in the short term, and possibly in the longer term, too. You only have to imagine losing vital customer records or financial data during the merger process to realise what a serious issue this could be for your newly merged company.
Much of this also falls under the umbrella of regulatory compliance, especially when it comes to personally identifiable information (PII). Mishandling this – or losing it altogether, as I mentioned – can result in hefty penalties, damage to reputation and, again, long-lasting consequences.
And there are smaller, but no less important, considerations as well. If there are system incompatibilities, for instance, you’ll face operational bumps in the road and reduced productivity – as well as teams of frustrated employees. You also risk missing out on the benefits of the merger if there are delays in data integration.
The result? Each of these risks can lead to expensive, reactive fixes. But by being proactive and addressing these potential data issues as part of your planning, the chances of a smooth, successful merger are far higher.
A framework for effective data governance in M&A
To navigate these challenges, you should develop a comprehensive approach to data governance and master data management (MDM). Here’s a basic framework for how you might do this, step by step.
- Build a transition team
Set up a team early in the process, including members from legal, IT, finance, tax and HR, to provide comprehensive oversight of all data governance aspects. This team should be responsible for promoting data-driven practices throughout the M&A process.
- Develop a data governance strategy
Create a detailed strategy and framework for the consistent management of data assets across your merged business. This includes putting in place clear policies, procedures and responsibilities for data management, and developing a data catalog and inventory of all data assets and tech infrastructure for a clearer overall picture.
- Establish robust MDM and data integration strategies
Align your MDM strategy with the business goals and values of each of your data assets. Consider various migration methods – such as big bang, phased or parallel – based on your specific needs and risk tolerance. By using MDM solutions, you can create a single, reliable source of truth for critical data domains, such as customer, employee and product data, enhancing decision-making and data quality.
- Conduct due diligence and risk assessment
You need a clear understanding of data-related laws and regulations in all jurisdictions to design a watertight governance, risk and compliance strategy and prevent any potential harm to your company’s reputation. Evaluate the scope, ownership and transferability of acquired data, and secure data privacy and security warranties from the seller as a safety net against any liabilities that are undisclosed.
- Prioritise data quality and compliance
You should maintain data integrity throughout the integration process and beyond, so introduce relevant data-quality metrics based on system requirements. This ongoing vigilance is essential for ensuring the data is reliable for your new merged venture. You also need to ensure compliance with data protection regulations, such as GDPR, while maintaining customer trust by properly managing PII. That means protecting sensitive information by using appropriate safeguards, processes, and documentation.
- Embrace change management and continuous improvement
Clear communication, comprehensive training, and ongoing support for staff is key. You should also bring in regular reviews of your data management strategies and post-merger assessments to refine operations and prepare for future M&A engagements.
Real-world application
The value of robust data governance and MDM in M&A is exemplified by Dentsu International, a global media and digital marketing communications company. Facing frequent M&A activity, Dentsu implemented a comprehensive MDM solution to consolidate data in its complex, multi-brand environment.
By using an integrated data platform to manage data across various local, regional and global systems, Dentsu was able to create a single source of truth for customer, supplier and reference data. The benefits of this were seen all over the business, including streamlining operations, improving data quality and enhancing decision-making, demonstrating the importance of comprehensive data management and strategy in M&A scenarios.
The path to M&A success
Effective data governance is crucial for M&A success, influencing operational efficiency and compliance. As we’ve seen, prioritising data management reduces risks and accelerates synergy realisation.
A structured approach can reveal hidden insights, leading to innovation and competitive advantages – and help with crucial decision-making for a post-merger business.
Organisations that embrace data governance principles are better positioned to create value, adapt to market changes and respond to customer needs. As M&A activity increases, companies that put data management first will turn challenges into opportunities for growth and innovation.
