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This two-part blog series aims to provide essential guidance and principles to stakeholders involved in Mergers & Acquisitions (M&A) regarding M&A Cloud Centers of Excellence (CCoEs). In this initial post, we explore the concept of an M&A CCoE. The second part will delve into the specific roles and responsibilities associated with these centers. Although this discussion is framed from the perspective of a buy-side entity, the insights, best practices, and considerations are relevant to a variety of M&A or customer scenarios. While many organizations may boast an existing M&A Integration Management Office (IMO), this series emphasizes crucial elements for establishing a cloud-focused branch of an IMO. Our goal is to help organizations optimize the value derived from their cloud investments.
Understanding CCOEs and the Need for M&A
AWS customers, regardless of their size or industry, are achieving greater success in the cloud by creating Cloud Centers of Excellence. These CCoEs assist organizations in implementing a clear enterprise cloud strategy, influencing C-level business and technology objectives, and evaluating the success of cloud initiatives. Successful examples from customers and partners include Zendesk, Crayon, and Astro. Building on the achievements of CCoEs, AWS Mergers & Acquisitions Advisory has pioneered the Mergers & Acquisitions Cloud Center of Excellence (M&A CCoE) to tackle common cloud-related issues encountered during M&A transactions.
Companies engaged in M&A often face challenges with cloud technologies, whether on the buy-side or sell-side of a deal. The obstacles of integrating IT organizations, application and infrastructure stacks, and technological processes introduce risks that can hinder both pre-close and post-close planning and execution. These challenges may quickly become impediments to realizing transaction value or fully leveraging investments. As acquiring entities define their deal thesis and synergy objectives, they must also strategize how their technology approach aligns with expected outcomes. A deal thesis—also known as deal rationale, investment thesis, or deal hypothesis—serves as the strategic justification for why a particular M&A transaction will generate value for the organization. Common cloud challenges that surface during M&A mergers include:
- Variations in cloud maturity and technical expertise
- Differences in IT responsibilities and infrastructure philosophies
- Lack of executive or managerial understanding of the cloud’s role in M&A
- Newly merged organizations grappling with unfamiliar technology stacks
- Alignment on “Deal Thesis,” “Deal Rationale,” and “Synergies”
One effective best practice for addressing these challenges is the establishment of a Mergers & Acquisitions Cloud Center of Excellence (CCoE). The M&A CCoE functions as a dedicated, cross-functional team that serves as a central cloud authority during M&A transactions. This team acts as the primary source of expertise on cloud matters and aids the organization in creating best practices and thought leadership throughout the M&A process. Additionally, the M&A CCoE enables the organization to establish repeatable processes, effectively manage change, and swiftly achieve expected deal synergies. The aim of the M&A CCoE is to address the identified cloud challenges.
Principles and Considerations for M&A CCoEs
The M&A transaction lifecycle typically unfolds in three phases: pre-transaction, pre-close, and post-close. Below are key considerations for the M&A CCoE during each phase.
During the pre-transaction and pre-close stages, the buy-side entity formulates, implements, and enforces a Mergers & Acquisitions Cloud Center of Excellence (M&A CCoE). Once executive and IT alignment on the overall M&A strategy is reached, the M&A CCoE spearheads the planning and execution of cloud-related tasks.
The staff of the M&A CCoE comprises executives from IT, Enterprise Architecture, Security, Finance, and Corporate Development, who focus primarily on cloud-specific value realization and risk mitigation throughout M&A activities. The M&A CCoE can either function as part of an existing CCoE or be established specifically for a single M&A transaction. Similarly, it can be integrated into an already existing M&A IMO or operate as an independent entity within the corporate structure. The M&A CCoE educates and influences stakeholder teams, serving as thought leaders and subject matter experts for IT integration, security, compliance, cloud, application, and infrastructure teams, as well as finance and Corporate Development teams responsible for executing relevant cloud tasks during an M&A transaction.
The M&A CCoE should encompass:
- An enterprise architecture function that establishes architecture, security, governance, and compliance standards for the M&A IT integration and related IT systems.
- Routine cloud diligence activities, such as cloud security risk assessments, on-premises technical debt evaluations, cloud cost optimization assessments, and infrastructure/workload asset valuation modeling.
- An assessment of the target IT organization’s cloud skill set, including strategies for personnel integration and cloud education plans for post-close integration.
- Key performance indicators (KPIs), milestones, and metrics to monitor the success of cloud tasks and their impact on synergy realization. This data serves as justification for resource allocation during M&A task planning and demonstrates the value of IT teams during M&A.
The M&A CCoE employs best practices and insights from these processes to create repeatable practices for future M&A transactions.
Following the Due Diligence phase, the M&A CCoE develops and publishes an M&A Cloud Operating Model (COM) and a post-close Integration Plan. In crafting this plan, M&A CCoE members collaborate with M&A stakeholders, working backward from due diligence, anticipated synergies, and the deal thesis. At this juncture, the M&A CCoE also prepares cloud integration playbooks for stakeholder teams to utilize during the post-close phases. They collaborate closely with Infrastructure and DevOps teams to establish standards, policies, and practices that facilitate cloud M&A integration tasks. This includes training teams on how to design an M&A well-architected landing zone to meet the governance standards of the buy-side entity. This M&A well-architected landing zone is an operationally efficient and secure cloud environment for the buy-side entity to inherit target IT estates and environments.
During the Post-Close phases, the M&A CCoE provides guidance to M&A IT Integration teams on cloud best practices for integration, monitors cloud tasks and priorities, and contributes thoughtful insights, ensuring a successful transition. For further insights on workplace dynamics, check out this blog post on ageism. Additionally, for a comprehensive understanding of the economic landscape, consider visiting this authoritative source on surging gas prices and their impact on worker wages. For more personal experiences, this Reddit discussion provides an excellent resource about onboarding at Amazon.