Computing the Benefits – A Financial M&A Scenario
Financial analysis can be complicated. Which makes it difficult to make informed decisions, since there are so many factors to consider. Products. Customers. Geographies. Partners. Periods. Quarter-over-quarter results. Year-over-year. Cost of sales. Revenue versus profitability. Competitive information. Market trends. And a limitless combination of all of these criteria.
This staggering amount of information always reminds me of the cartoons that depict a very cluttered desk, with stacks of papers that are higher than the person sitting behind it.
And this has not changed with the introduction of computers. There is even more data out there now, but identifying the right information is key to making the best decisions for your company.
This is made even more complex when contemplating expansion.
Imagine that you are a US-based computer company who wants to expand globally. To do so, you determine that the next large market for your software is in France. You have a decision to make: build a product for this market yourself, or acquire a competitor that already has a large base there. And there may be about a dozen competitors already in that space.
In the past, the evaluation meant bringing together information from disparate systems – basically a spreadsheet-based evaluation, meaning a significant amount of manual consolidation of core data (think back to that cluttered desk). And the task of consolidating data did not yet include evaluation the data. Or incorporating external data on the targeted acquisitions. So your finance department probably needed to pre-select a few of the scenarios, since they did not have the capacity to evaluate each scenario manually.
This probably resulted in missed opportunities.
Now think of the quote from the movie “Philadelphia” which was repeated often: “Explain it to me like I’m a 6-year-old.” Which is basically saying that we need to cut to the chase. And make it easier to identify the key drivers that influence the bottom-line financial results of business decisions.
With SAP S/4HANA Finance, and its in-memory technology, Finance is now able to evaluate the financial impact of each and every scenario with sophisticated planning tools, by incorporating external information on each target acquisition, as well as evaluating the possibility of in-house development of the product. Plus looking at working capital projections. This involves using planning and predictive capabilities within SAP S/4HANA Finance. First, you identify profitability drivers that incorporate customers, products, geographies, and partners. Then you manipulate one or multiple combinations of these profitability drivers, to identify the potential financial impact of each scenario. Which all reduces your risk when making such a strategic decision.
With the capability to look at each and every scenario, you are in a position to make the best possible decision, without missing opportunities.
And let’s assume you decided to go forward with a specific acquisition. SAP S/4HANA Finance will now allow you to monitor the ROI as the acquisition moves forward, enabling you to compare your planning with the actual results. And report out to your stakeholders and shareholders.
Even if you are not planning an acquisition or a product expansion – evaluating your profitability and your ROI on any project are critical. Involving Finance, and determining profitability drivers, will also help you make the best possible decision.
Want to know more? Visit http://www.sap.com/s4hana. And for specific finance solutions, read more at http://go.sap.com/solution/lob/finance/s4hana-finance-erp.html.