Workday recently celebrated its 18th birthday with a customer base in excess of 10,000. As Workday’s popularity grows, so do the mergers, acquisitions, and divestments that occur among its customer base.
Managing these transactions can be challenging, but it’s becoming a growing requirement for those managing Workday systems.
At Preos, we have helped many organisations navigate mergers, acquisitions, and divestments. We previously discussed in a blog how each M&A situation requires a unique solution. Divestment also requires you to take a strategic approach with similar considerations.
It’s important to carefully assess the situation and ask:
What is the size of the divestment?
The size and scale of the divested entity will dictate the data and system requirements needed for the transaction.
When divesting a niche area of your business with a limited number of employees, the need to think of system-to-system data transfers would not be appropriate. However, there is a requirement to reliably extract the data meaning a clear data extraction approach must be taken.
Conversely, if a significant proportion of your organisation is being divested, or the employee count is large, the need for system-to-system data transfer must be addressed.
What form does the deal take?
The structure of the transaction will be a crucial factor in planning and executing the divestment. The form of the deal will likely be dictated by the buyer, whether it’s a private equity deal, IPO, or acquisition by another organisation.
- Private Equity
If the transaction is primed as a private equity deal, it is likely the divested entity will require medium-term use of systems provided by the parent company (typically using a TSA). This is typically followed by either data transfer to a net new system or, in the case of Workday customers, a copy or build to a new tenant.
A transaction centred on an IPO is likely to follow the same pattern as a PE transaction with system support being required before separation.
- Purchase by another organisation
If the entity is being acquired by another organisation, the form of separation can take many shapes.
If the number of employees involved in the transaction is low, it may require a set of custom reports to deliver data to the acquiring organisation on or around the divestment date.
For larger employee populations involving significant employee numbers, there may be a prolonged period of maintaining the separated population within the parent company system before a separation.
The scenarios discussed above are not comprehensive, but whichever form the transaction takes, the requirements of the deal will inform the approach. The sale of the deal leads to another significant area of focus, regulatory requirements.
What are the regulatory and legal requirements?
Regulatory and legal requirements are also essential to consider, as any divestment will likely go through some form of regulatory process which will further guide the approach taken. The technical responses to the regulatory requirement will dominate the approach taken, including the need to consider:
- Separation of data
There will be a need to separate data within your existing system, typically using logical separation and security controls. Usually, this will become a requirement upon announcement of the deal.
- Data Purging
Once a deal is complete, it is critical to consider the need to purge data transferred to the new owner. Understanding the data footprint and implementing a clear strategy should be in your early plans.
What is the timeline?
Likely, the previously mentioned areas of size, scale, deal formation and regulatory requirements will have already defined many aspects of your approach. However, the timeline is an important strategic and tactical consideration. It is critical to understand what is realistic, the amount of effort required in the various approaches and the business need.
As with M&A, there is not one correct approach or answer to how divestments should be managed within Workday.
However, the lenses discussed above and the timeliness with which an organisation reviews and understands the environment of the divestment will contribute to the success of the separation and ongoing success of both organisations.
At Preos, our team of experts have significant experience in successfully guiding numerous organisations through the complexities of mergers, acquisitions, and divestments. Let us help you navigate the path ahead with confidence and ease.
Contact us today to see how we can support you to ensure a successful outcome.
Image (c) by Ronald carreño from Pixabay