Financial integration fraught with many risks

One of the primary challenges following a merger or acquisition in the architecture and engineering industry is the integration of financial systems. It’s an extremely complex process, says Bernard Freiheit, director of financial development and technical services at Stantec (Edmonton, AB), a 10,000-person planning, engineering, architecture, interior design, landscape architecture, environmental sciences, and project management firm that recently acquired Burt Hill (Philadelphia, PA), a 600-person architecture firm. There are risks and dangers at every turn, Freiheit says, many of which can have lasting consequences if not avoided or if the integration is poorly executed. “Financial integration means not only the accounting information but also, and much more importantly, project management information, which is the lifeblood of our business,” he says. Jeff Clark, managing director and principal specializing in mergers and acquisitions at ZweigWhite, advises firms against rushing to integrate financial systems. “Unless the system and process is broken or inadequate, it is better off left alone for the initial phases of integration,” he says. Customized systems cause problems One of the problems often encountered when integrating financial systems is the issue of functionality or customization gaps. “Some companies may have highly customized solutions developed within their financial systems for certain business processes or related to their client sector, which do not have a corresponding solution that our financial systems support, or support in the same way,” Freiheit says. Another issue might be that the reporting and business processes have become ingrained in a company’s culture and the way the business views its operations. “One of the challenges of integration is retooling staff with new business processes and reporting, as no two systems are exactly the same,” Freiheit says. Stantec has dealt with such issues by acting proactively. “At Stantec, we have highly evolved processes and a systems integration team, which has stemmed from the very active acquisition program that we have,” he says. “This team is made up of a small core group of very talented individuals, including a project manager, which is consistent from acquisition to acquisition.” The three pillars of financial integration There are three important elements in the integration process, Freiheit says, including planning of all the steps in the process, solid execution, and lots of communication along the way. Financial integration planning meetings and discussions begin early in the process and tie in all the relevant parties, later expanding to include key members of the acquired company. A detailed project plan is always developed for every acquisition and shared with all members. “To address issues identified with data elements, structures, and system limitations, we have in our acquisition process a review of data quality and elements,” he says. “In some cases we may plan for some data cleanup in the legacy system, and in all other cases we address this through a step in our process called ‘PDQ: Project Data Quality’ whereby data that we are expecting to convert is first reviewed and signed off in a staging area, prior to being migrated into our systems.” Detailed planning addresses the steps and timing necessary to ensure that IT systems are in place before the integration begins, and work around their limitations. Freiheit says the steps don’t end with the completion of the financial data integration. “We mobilize an army of trainers and training programs to assist the transitioned staff and leadership to understand our business processes, tools, and reports, and get our people on the ground wherever practical,” he says. “Our successful acquisition program relies on an amazing group of individuals dedicated to this program; we truly live and breathe the ‘One Team, Infinite Solutions’ behind the scenes too.” For 12 weekly pages of content like this, subscribe to The Zweig Letter here