According to Thomson Reuters, the Life Sciences industry had 119 merger & acquisition (M&A) transactions reported in Q4 2014. Although the number of deals was only slightly more than the 117 transactions from Q3 2014, the value of those deals was more than twice the previous quarter increasing from $50 billion in Q3 2014 to $114 Billion in Q4 2014. The M&A activity is primarily fueled by access to R&D pipelines as the pressure to get new drugs and devices to market continues to grow.
But as organizations grow through acquisition, they are faced with a new set of priorities and complexities that threaten the expected benefits of any transaction CFOs must quickly understand their new cost structures, demand curves and operating models across the entirety of the IT system landscape while creating a business plan to operationalize their new company. Further, this process needs to be automated to ensure scalability, repeatability and reliability of the information generated.
SAP’s recent announcement of the new S/4 HANA platform is both timely and transformational for the Life Sciences industry. First, SAP’s S/4 HANA is the only enterprise system in the world that allows users to have real time access to transactions and analytics on the same platform that can radically transform and simplify business processes in ways that were not previously possible. Further, S/4 HANA has unique capabilities that allow it to import transactional level data from SAP or non-SAP systems, in real time, to allow complete financial visibility for companies involved in M&A.
For example, an organization runs SAP acquires a company who runs SAP and non-SAP IT systems. Typically, organizations would begin the process of integrating the systems, generating endless spreadsheets, aggregating all types of data and then repeating the process for every reporting period. SAP’s S/4 HANA platform allows an organization to transmit, in real time, its line level transaction data, no aggregations, no indexing and/or no integration, into the S/4 HANA system where the new company can use the SAP Simple Finance application to generate financial documents, do cash projections and/or view the quarter close, all in real time. The systems remain in sync due to the continuous real time replication of any source system transaction into the SAP S/4 HANA system.
Additionally, SAP S/4 HANA has real time transactional data from the new company that can create operational views at any level or function. One scenario could leverage all the transactional data with the SAP’s Sales & Operations Planning application to enable a consensus planning process that integrates demand, inventory, finance, manufacturing and sales transactional information from across the new organization. The information is manipulated and simulated in real time based on the executive recommendations to generate the consensus forecast for the new company. Executives can quickly assess how and where they will realize the synergies of the acquisition and focus on generating the procurement and operational savings that will be realized months and quarters earlier than without S/4 HANA.
Lastly, the new world of Life Sciences requires companies to be nimble, flexible and responsive to a rapidly changing and challenging business climate. Mergers & acquisitions, healthcare reform, serialization legislation and emerging market expansion are just some of the many critical business issues that require technology platforms that can deliver information to users in real time and in context of the business process while still allowing for flexibility when the market inevitably changes. SAP’s S/4 HANA has the ability to deliver the transformational technology, elegant user interfaces and simplified processes that will enable the success of Life Science companies in 2015 and beyond.
