How CIOs can help make manufacturing mergers and acquisitions a success

The manufacturing industry faces many challenges, including global inflation, inflated energy prices, supply-chain issues and sustainability demands. Despite these issues, enterprises are still focused on mergers and acquisitions (M&As) to scale efficiencies and gain access to new service capabilities. These combined is driving them to rapidly transform and re-imagine their digital strategies.

Multinationals are focusing on acquisitions to access new technology and service capabilities or create scale efficiencies through consolidation that can create sustainable competitive advantage. They are also looking to M&As to build greater resilience into their supply chains. Last year, the industrial sector contributed 15% of value globally for deals over $25 million in Europe, the Middle East and Africa (EMEA). The trend is continuing.

At McKinsey’s recent European M&A conference co-hosted with Goldman Sachs, over 50% of participants polled said they expect to increase their M&A activity or pursue transformative deals this year.

According to McKinsey, many mergers don’t live up to expectations because they slip up on integrating technology and operations. Manufacturing is no exception. IT integration as part of an overarching transformation strategy can help M&As succeed.

M&A-driven transformations don’t happen overnight. As Gartner points out, smart factory programs require cultural and operational shifts that often need new designs to integrate capabilities into the wider supply chain.

Supporting change in mergers and acquisitions

M&As can bring with them new skills and technologies, together with an additional source of valuable data. Often, however, enterprises don’t have the in-house resources to support these integrations. Without a robust strategy, they can result in unwanted complexities and, at worst, failure.

Strategic planning, discovery, implementation and integration are all major challenges regarding M&A and IT infrastructures. A clear vision is required to create a centralized platform, introduce new services, provide a differentiator from the competition and handle cultural change.

The power of data

By connecting these factories as part of M&A strategies, there are significant opportunities to collect, process and share data, track products from inception to delivery, schedule machine maintenance, reduce downtime and better manage energy costs.

All too often, however, enterprises converge office applications, such as email, when they merge but run each plant independently – often via disparate systems that are not connected. Why? Because they have no defined strategy on how to combine them. OT and IT systems are running at different levels from different vendors and through various technology partners. Pulling together a centralized system with one source of truth is daunting.

Again, however, I cannot stress how important it is to have a robust data-driven roadmap to ensure that projects stay on budget and consider possible reengineering costs, for example. As Gartner points out, to manage these projects, it is essential to execute gradually and be realistic about expectations at each stage.

Hyperconnectivity increases the size of the attack landscape

M&As bring with them a new level of connectedness and a whole new level of expanded cyber vulnerability. Smart factories are no exception. Manufacturing was the most targeted sector for ransomware in 2022, for example. They are a primary target because of the impact downtime creates. Cybersecurity is paramount in M&A activity in identifying risk and mitigating it accordingly. Cybersecurity due diligence can help to uncover any issues.

Many factories struggle with cybersecurity because they don’t know what is going on from a governance perspective regarding consistent and trustworthy data processing. M&As magnify this. Different factories have different risks and don’t have an overarching picture of the various levels.

It is wise to run a security maturity assessment to include OT environments, networking and supply-chain ecosystems. This can be used to create the foundation of a security strategy. This follows an asset assessment to look at the status of the infrastructure, applications and equipment, what is connected and not connected, so that a roadmap can be formulated that securely connects to a central data platform and a single source of truth.

The next step is to set up a cybersecurity governance program considering IT and OT, providing consistency in security policy across all plants.

Jump-starting digital transformation with M&As

M&As can allow manufacturers to jump-start their digital transformation projects and, in some cases, leapfrog competitors by scaling up digital capabilities. But transformation is not a tick-box exercise. It is a continuous process as part of any M&A. Manufacturers must have a trusted partner and consultative approach to put a working roadmap in place, as there will be significant changes to people, processes and technology. One that takes advantage of emerging technologies.

Orange, for example, has been working with Schneider Electric on a co-innovation project to ensure efficient convergence between IT and OT at its 5G-enabled smart factory in Vaudreuil, France. The project highlights the potential of 5G to support augmented reality and remote management.

Acquiring your way to an accelerated transformation can be a wise move. It can maximize digital value and boost productivity and the bottom line; but without a solid plan and a trusted partner, it could see you go backward.

Find out more about how Orange Business supports the industrial world in its digital transformation processes.

Dave Van Meer
Dave Van Meer

Dave van Meer is Head of Solutions at Orange Business in Netherlands. He brings 20 years of extensive leadership in the Consulting and Managed Services ICT industries. As in his career, he also values relationships in his private life and is people centric. He loves to spend time with his family and friends. His lifetime hobby and sport is volleyball, on the court and on the beach.