Strategies on Changeover of ERP Systems in an Acquisition
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When buying out a company, there is a typical need to changeover the existing ERP systems at some point either in tandem with the buyout or at some point within the next 6-24 months. Do you have any best in practice methods when it comes to analyzing the existing systems and how to approach the changeover timing, funding, challenges, etc.
Hi Kristi, I think it really depends on the size of organizations and structure of acquisition as to whether a whole new ERP system is required. When the deal is a smaller asset purchase or carve out, the acquired company retains their A/P, A/R, etc. The ERP of the buyer would just be updated to do go forward billing of the acquired customers and existing reporting would be modified incorporate the new business unit / set of customers. In an equity purchase situation, or addition of a new division or similar, care needs to be taken in the diligence period to determine the size and scale of the organization being acquired. From my experience, the best approach is to bring in IT and ERP experts who know what to look for in terms of transaction volume, complexity of ERP configurations, etc. They can then create a realistic frame of reference for what is needed in future and what the associated cost might be. In our case, we haven’t yet needed to fully replace our ERP. We have had to add integrated tools and expand licenses but the cost of that is a fraction of a full replacement.
The first question is not “when do we migrate” but “do we need to?” If the target stays standalone — common in PE buy-and-build — you may only need reporting alignment, not full replacement.
When migration is needed, assess the landscape first: what system, what version, how customised, what feeds into it. Committing to a timeline before understanding complexity is how ERP projects go 3x over budget.
On timing, there are two windows: “fast follow” (6-12 months, when the system is clearly inadequate) or “stabilise then migrate” (12-24 months, safer when other integration workstreams are already consuming capacity).
Budget 1.5-2x the initial estimate. Hidden costs — dual running, productivity loss, data cleansing — always exceed the licence and implementation fees.
The biggest challenge is data migration, not software. Start master data mapping early and treat it as its own workstream.
ERP changeover is a business transformation, not an IT project.
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