Why Private equity (PE) investors favour SAP

Dragon ERP - Our AI SAP implementation tooling takes the risk out of your TSA exit critical path

1. Why the Private Equity love affair with SAP ?
Private equity (PE) investors favour companies running SAP systems in support of mergers and acquisitions (M&A), because of the strategic and operational advantages SAP provides.

In PE-led buy-and-build strategies, SAP helps integrate smaller companies into the platform company’s operations quickly and efficiently. This ensures faster realization of synergies and smoother transitions.

SAP’s ability to act as a backbone for integration, analysis, and scalability makes it a preferred system for PE investors targeting efficiency and growth in M&A deals.

2. Rapid ownership take on:
But lets not forget, SAP is not tech, its an oven ready (thank you Boris) Industry 4.0 target operating model that any organisation, in any industry sector can quickly leverage to run its organisation with.

BCG, Bain and McKinsey all acknowledge SAP provides best of breed business processes and SOX compliant controls, enabling Private Equity (PE) owners to rapidly take ownership by dropping their acquisitions onto a carve out read template.

3. SAP Designed for Carve Out
SAP has its own tooling and methodology designed specifically to carve out a disposal from a complex SAP template.

SAP’s methodology supports master data and legal entity segmentation using the SAP Landscape Transition tooling, however this is a lengthy process as is the transactional and master data migration. Integration dependencies also add time placing the overall TSA at risk.

4. Dragon ERP’s Low Risk TSA Exit methodology and Tooling
We have a tailored Phase Zero assessment linked to out LeapGreat migration tool, which will generate the target SAP S/4HANA solution within 7 to 10 days. This includes RICEFW simplification and is linked to the SAP Signavio process mining tool which will identify additional areas of process optimisation.

With a pre-built target SAP system in place, data migration, integration remediation can be accelerated using UiPath AI for test and data migration and Joule AI for any configuration tweeks.

Our methodology significantly reduces the dependency on the sellers IT organisation and forming to-be organisation.

Additional SAP Value Add:

5. Comprehensive Data for Decision-Making

• Consolidated Systems: SAP integrates key business processes across finance, supply chain, operations, and HR. This centralization provides PE investors with reliable, real-time data to evaluate a company’s performance and potential synergies in an M&A deal.

• Due Diligence: SAP’s reporting capabilities help streamline financial and operational due diligence, reducing the risk of surprises post-acquisition.

6. Ease of operational Integration

• SAP facilitates post-merger integration by providing a standardized platform for combining operations across acquired companies.

• Many companies in different industries already use SAP, simplifying the integration process for PE-backed portfolio companies.

7. Scalability

• SAP systems are built to scale with growing businesses. For PE firms aiming to grow or consolidate businesses quickly, SAP ensures the infrastructure can support the expansion.

8. Cost Optimization

• SAP Signavio and LeanIX help identify inefficiencies in supply chains, procurement, or finance during the pre- or post-acquisition process. This is critical for value creation, a cornerstone of PE investment strategies.

9. Automation and Efficiency

• By leveraging SAP’s automation capabilities, PE investors can achieve rapid operational improvements, which align with their focus on maximizing EBITDA.
• By leveraging SAP’s automation capabilities, PE investors can achieve rapid operational improvements, which align with their focus on maximizing EBITDA.

10. Enhanced Governance and Compliance

• SAP systems provide robust SOX compliance and IFRS governance, risk management, and compliance features. These are essential for PE firms dealing with multi-geography businesses, ensuring smooth regulatory adherence across regions.

11. Support for Value-Creation Plans

• Many PE investors execute value-creation strategies involving operational improvements, revenue growth, and cost synergies. SAP offers modules that support such initiatives, such as advanced analytics (SAP Analytics Cloud) or supply chain optimization tools (SAP Integrated Business Planning) or Industry solutions such as SAP Manufacturing cloud.

12. Exit Readiness

• A company running on SAP is often viewed as a more attractive asset during an exit. Buyers see the system as a sign of operational maturity and reliability, which can positively impact valuations.

13. Operating Model Warranty

We know PE investors value the ability to have a detailed enterprise design of their acquisitions, which acts as the organisational BOM. This details the Organisation as a Product which when sold on can be readily quantified for any future buyer. SAP LeanIX can provide a view of the acquisition at the point of TSA exit and at any given time there after.

In Summary:

SAP and Dragon ERP combined can take the risk out of any M&A carve out and TSA exit strategy.

• Rapid Carve out phase zero discovery

• Low risk TSA exit

• Accelerated operational integration

• Accelerated buy and build

If you need help, then contact a Dragon……

Paul and Alisdair at a SAP Partner day