How Does a Corporate Takeover Affect the ERP System? Part 1 Company Sale

Nowadays, business acquisitions are becoming increasingly common. But what does this mean for IT systems, particularly the ERP system?

An acquisition not only means systems must be merged; sometimes they need to be separated. Imagine that, as part of the sale agreement, the company continues to operate on the existing ERP system for a year before becoming independent. Is that enough time to transfer all processes? Or would it be better to run two ERP systems in parallel?

At Cadran Consultancy, we’re encountering these kinds of questions more frequently. What should you consider? What challenges can you expect? And how do you approach this? In this blog (part 1), we share our perspective on situations where a company is being sold.

Selling a Company

This situation is common among our clients. Company X uses Oracle JD Edwards ERP, configured with multiple business units: production, distribution, service, or a combination thereof.

How do we approach this?

First, it depends on the terms of the sale. Will JD Edwards continue to be used under the new owner, or will the company switch to the buyer’s ERP system?

Our preference is often to retain JD Edwards and integrate it with the buyer’s ERP system. We divide this process into three phases:

1. separating workflows and security,
2. physically separating the systems,
3. cleaning up data in the separated systems.

Phase 1: Separating workflows and security

We start with an analysis of the shared processes between the business units in JD Edwards, such as intercompany deliveries and shared services for accounts receivable and customer service.

The first step is to separate the business units in JD Edwards by adding security measures, so that employees of company A no longer have access to company B’s data and vice versa. This can present challenges, such as shared customer and item files that may no longer function correctly after the security separation.

Therefore, we first review business processes and data usage, carefully planning the separation, including security for test and production environments. For intercompany deliveries between companies, we establish a new process where company A and company B act as customers and suppliers for each other.

After these steps, we implement the separation of workflows and security in the production environment. The result is a single JD Edwards environment where both companies can operate independently.

Phase 2: Physically separating the systems

The next step is to physically separate the systems. This often involves purchasing new hardware to create a copy of the JD Edwards environment. All connected applications, such as AP scanning, document formatting software, and external WMS and production systems, must also be copied. This step requires time for testing and preparation. After go-live, there are two systems that operate independently.

Phase 3: Data cleanup

After separation, all old data remains in both systems. This is usually cleaned up in at least one of the environments. Data is cleaned up in phases to ensure the system continues to function correctly, with the right data in the right system. Database as it exists once Phase 2 is complete:

• Sector I: Data of company A from before the sale → owned by company A and must be removed from company B’s system.
• Sector II: Data of company B from before the sale → owned by company A, remains present in both systems.
• Sector III: Data of company A from after the sale → owned by company A and must be removed from company B’s system.
• Sector IV: Data of company B from after the sale → owned by company B, potentially to be cleaned up from company A’s system.

It is often agreed upon how to handle Sector IV, as cleaning it up can be intensive and may add little extra value.

In Conclusion

Is this everything you need to arrange? No, this is just the beginning. In these blogs, we briefly discuss ERP separation and integration. We exclude considerations like hardware consolidation and network integration. These aspects, along with infrastructure and office software, play a significant role in these projects and each have their own impact on ERP projects.