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Authors: Ayten Erbektas, Katie Nistad, Dmitry Melnik, SAP
Unlocking Value in Mergers, Acquisitions, and Divestitures through SAP: A Key Enabler for the Consumer Packaged Goods Industry
Heated debate has been ongoing for almost three hours. Ceylan, Head of Marketing and Sales, reflected on the Board’s deliberations to sell one of the company’s business units amidst recently declining returns. After all, she was the one who recommended to buy that brand almost a decade ago. But times change as do consumer preferences – and these products no longer experienced high demand across all retail locations of the company’s partners. Yesterday, Ceylan proposed to the Board another acquisition, of a high-promising consumer brand which would allow the company not only to reinvigorate its portfolio and consumer appeal, but also to diversify into an adjacent market. Directors gazed intently at Ceylan: it was her time to answer the key question of the day, “How ready are the company’s systems and processes to execute such a divestiture and digest such an acquisition?”
Our blog examines this topic and summarizes the experiences of multiple SAP customers who constantly rebalance their portfolio with the help of SAP solutions.
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In today’s rapidly evolving Consumer Packaged Goods (CPG) industry, corporate combinations have emerged as a central growth strategy. Mergers, acquisitions, and divestitures (M&A/D) enable companies to expand their market reach, enter new segments, and drive revenue growth. However, managing these processes effectively is no easy feat. Companies face numerous challenges, from long due diligence processes and transition delays to under-realized synergies. This is where SAP S/4HANA, a powerful ERP system, can play a transformative role in helping organizations unlock the full potential of their M&A/D activities. Moreover, SAP solutions help monitor the optimal composition of the corporate portfolio: does brand A continue to perform? are we detecting early signs of the performance deterioration in brand B? why does brand C – while performing as usual – require even increasing investments which lower its ROI? These and many similar questions are addressed by SAP solutions in real-time.
The Growing Role of M&A/D in the CPG Industry
In an industry characterized by fierce competition and shifting consumer preferences, M&A has become an essential tool for companies to remain competitive and grow their market share. Many CPG companies invest billions in acquiring new businesses to enter different markets, diversify their product offerings, or increase revenue. At the same time, divesting from non-core assets helps streamline operations and focus on strategic goals. Picture below displays M&A/D experience of just one of many SAP customers: it shows clearly that M&A/D is a big deal.
While the potential benefits of M&A are substantial, the process of integrating acquired businesses is complex and fraught with challenges. The integration of disparate systems, aligning corporate cultures, and realizing synergies in operations and costs are just a few of the hurdles companies must overcome. In many cases, companies struggle to meet these integration goals, leading to missed opportunities and suboptimal returns on investment. Transition Service Agreements (TSA) customarily executed between the buyer and the seller also present a significant cost item: the example above shows that just 10 acquisitions in 16 years cost the acquiror $470m in TSA and other PMI costs – in addition to over $8bn in purchase price.
To address these challenges, forward-thinking companies are turning to SAP S/4HANA, an ERP system designed to support the full M&A lifecycle—from due diligence to post-merger integration. SAP S/4HANA’s capabilities enable organizations to streamline processes, reduce redundant operations, and ensure data consistency, thus accelerating the integration process and unlocking value more efficiently. Many other SAP solutions provide solid foundation to execute M&A/D, including SAP Analytics Cloud, PaPM, SAP MDM and others. But to keep things simple, we will focus on SAP S/4HANA.
SAP S/4HANA: A Catalyst for Successful M&A Integration
Based on our experience in supporting customers’ strategic investments in SAP technology, we have seen how SAP S/4HANA can significantly enhance M&A outcomes. One of the key lessons from my previous role in post-merger integration is that the success of an M&A often hinges on how quickly and effectively a company can integrate its new acquisition into its existing operations.
The picture above is derived from the M&A experiences of many SAP customers and shows typical deal execution and consummation phases. So, how do customers utilize SAP solutions for their inorganic growth and portfolio rebalancing? SAP S/4HANA provides a structured framework to manage M&A activities from pre-transaction to post-merger integration. Let’s break down how this system supports the three critical phases of integration:
- Addressing Immediate Priorities: One of the most urgent challenges after an acquisition is financial reporting. SAP S/4HANA Group Reporting simplifies this process by enabling companies to consolidate financial data from multiple systems, regardless of whether the acquired business uses SAP or another ERP. This ensures timely, accurate reporting and compliance, which is essential during the early stages of integration.
- Realizing Synergies: Once the immediate reporting requirements are met, the next step is to realize the synergies that motivated the acquisition. SAP S/4HANA helps organizations streamline operations by identifying and eliminating redundant processes, integrating procurement and supply chain functions, and extending shared services to the newly acquired entity. Automation is a key enabler in this phase, allowing companies to reduce manual tasks and improve efficiency.
- Driving Long-Term Growth: After the operational synergies are achieved, companies can focus on long-term growth by optimizing production, procurement, and other key business functions. SAP S/4HANA’s advanced analytics and production planning tools, such as MRP Live, allow organizations to make data-driven decisions that enhance efficiency, reduce costs, and improve product quality. This helps companies leverage their new acquisitions to drive growth and expand into new markets.
Flexibility in Cloud Deployment: Tailored to Your Needs
One of SAP S/4HANA’s standout features is its flexibility in deployment. Whether through public or private cloud models, it provides companies with the agility to tailor their ERP system to meet the specific needs of each acquisition. Smaller acquisitions can be onboarded quickly and efficiently through the S/4HANA public cloud, ensuring faster integration at a lower cost. For larger, more complex acquisitions, the private cloud offers more customization and control, allowing companies to address sophisticated processes while maintaining standardization where needed.
This two-tiered cloud architecture is ideal for companies that regularly engage in M&A activities, as it offers a scalable and adaptable solution to meet the varying demands of different acquisitions. SAP S/4HANA enables companies to onboard smaller acquisitions quickly while reserving the more robust private cloud for larger, more intricate integrations.
Success Stories: Driving M&A Value with SAP S/4HANA
Many leading companies have successfully used SAP S/4HANA to optimize their M&A processes and realize significant value from their acquisitions. For instance, global organizations in industries ranging from fashion to manufacturing have extended their shared services and automated key processes through SAP S/4HANA, driving operational efficiencies and enabling faster growth.
By integrating disparate systems, standardizing data, and automating core functions such as procurement and finance, these companies have been able to reduce costs, improve reporting accuracy, and enhance decision-making capabilities. The result? Greater agility, faster time-to-market, and improved financial performance post-acquisition.
The Future of M&A with SAP S/4HANA
As the CPG industry continues to evolve, consolidation will remain a key strategy for growth. Companies that can successfully navigate the complexities of M&A will be well-positioned to thrive in this dynamic environment. SAP S/4HANA offers the tools needed to unlock the full potential of M&A, enabling companies to integrate acquisitions more smoothly, realize synergies faster, and drive long-term value.
With its flexible cloud deployment options, advanced analytics, and automation capabilities, SAP S/4HANA provides the foundation for companies to stay agile, profitable, and ahead of the curve in their M&A endeavors.
Conclusion: Empowering M&A Success with SAP S/4HANA
Mergers, acquisitions, and divestitures are powerful tools for driving growth, but they also come with significant challenges. Companies need a robust and flexible ERP system to navigate these complexities and maximize the value of their M&A activities. SAP S/4HANA is designed to do just that—helping businesses streamline integration, unlock synergies, and position themselves for long-term growth.
In short, SAP S/4HANA is not just another ERP system—it’s a strategic enabler that empowers companies to realize the full value of their M&A strategies and stay competitive in the fast-changing CPG industry.
For those ready to explore how SAP S/4HANA can support their M&A journey, the opportunity is now. Unlock the value, stay agile, and drive growth with the right tools in place.
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The Board voted unanimously. Both the divestiture and the acquisition were approved and would happen very soon. Ceylan felt that this decision also marked the vote of confidence in her own team, which JAD relentlessly implemented modern IT solutions throughout the entire company. She sat in front of her team and business owners assigned to this acquisition. Much work was ahead of them in the post-merger integration. But this would take the company to the next level in product and geographic scope. And there was so much else to accomplish throughout the PMI!,,,”
