ERP Topics for Private Equity Firms
For Private Equity companies, the following are a number of opportunity areas when dealing with ERP in portfolio companies and potential acquisitions.
ERP status in target companies: The status of the ERP in companies in which your firm is considering an investment. Valuation adjustments and decisions can be based on the target company’s:
- ERP not being selected well and suffering from a combination of poor commercial terms and high ongoing costs.
- ERP having dated technology and the status of the ERP seller’s ability or willingness to fix the situation.
- ERP implementation having been poorly executed and the potentially significant effort and risk to clean up the situation.
- ERP transfer rights being cloudy or not existing. Without these rights, when a company is sold to a buyer the company’s ERP cannot be readily transferred without permission from, and usually further fees paid to, the ERP seller.
ERP in current company portfolio
- Developing an Enterprise Software Strategy plan that establishes key applications and their legitimate functional domains. Such a plan is important to have before improvement actions are made on any application component—especially ERP.
- Strategies and detailed plans for unifying ERP across multiple companies. Opportunities to control risk and costs are typically many—and hard to effectively exploit.
- Evaluating the existing terms and ongoing costs associated with the ERP or other enterprise software. Establish opportunities for improvement and timing to execute.
Cloud ERP risks: Controlling the serious risks of Cloud ERP related to the:
- Unbounded future costs for subscription renewals, new users, functional modules and other areas in which buyers are increasingly charged over time.
- Threat that the ERP company has the ability to shut off the ERP based on its point of view in a dispute.
- ERP vendor suddenly ceasing operations one day (customers rarely would receive proper notice to have time to execute a change). So is a third-party Cloud ERP fail-over plan offered or not?
ERP vendor acquisitions: The subscription-based Cloud ERP industry has major structural problems, and highly disruptive forces are gathering that will eventually make obsolete ERP sellers that do not adapt to what we believe are unavoidable changes. These structural problems are not recognized by most ERP experts as they've accepted foundational assumptions about remote access ERP—which is driven by the self-interests of the ERP sellers. If a private equity firm has a current or potential interest in an ERP company, then a conversation exploring this information should be quite thought provoking and useful.
Engleman Associates has conducted over 1000 ERP projects since 1996 and possesses truly exceptional experience and intellectual property that have a high correlation to controlling initial and ongoing ERP access cost, project risk, and results.
We welcome a phone call to field your questions and ideas. Contact our president Mark Engleman at 360-699-6150 x1005 or schedule a meeting here.
ERP Selection – Provo Craft
SoftSelect was a great partner throughout the process of choosing an ERP solution. They helped us control the terms throughout the ERP buying process, and we achieved impressive results in reduced ERP license fees. Having an experienced partner like SoftSelect, helped us negotiate for the products we need and set our expectations for the process of implementing these solutions.
ERP Selection – Leupold & Stevens
Long term ERP license costs were initially very difficult to calculate. Working with SoftSelect we were able to insist on a predicable ERP license fee approach and achieve much lower initial and ongoing license fee costs.
ERP Selection – Cornell Pump
Negotiating ERP costs is complicated and the ERP software vendors take advantage of the buyer’s lack of experience. SoftSelect’s experience and influence helped us level the playing field. We clearly saved money and lowered our long term risk.