Who Does What, When, and How for a Divestiture?

© 2015 eprentise. All rights reserved.
Who Does What, When, and How for a
Divestiture?
Anil Kukreja
Chief Operating Officer, eprentise PVT
Ihtesham Uddin
Sr. Director, Product Development, eprentise

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• Everyone will receive an email with a link
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session.
• Polling questions will be presented
during the session. If you want CPE
credit for this webinar, you must answer
all of the polling questions.
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Learning Objectives
Objective 1: Understand key considerations for businesses
going through a divestiture, and how to address them.
Objective 2: Take a look at a new or reimplementation
option, separating data either within an instance or as a
standalone, and masking alternatives.
Objective 3: Outline an approach for a
successful divestiture that can be used by both business
and IT.
3
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eprentise Can… …So Our Customers Can:
Consolidate Multiple EBS Instances
Change Underlying Structures and
Configurations
 Chart of Accounts, Other Flexfields
 Inventory Organizations
 Operating Groups, Legal Entities,
Ledgers
 Calendars
 Costing Methods
Resolve Duplicates, Change Sequences,
IDs
Separate Data for a Divestiture
: Transformation Software for E-Business Suite
Reduce Operating Costs and Increase
Efficiencies
 Shared Services
 Data Centers
Adapt to Change
 Align with New Business Initiatives
 Mergers, Acquisitions, Divestitures
 Pattern-Based Strategies
• Make ERP an Adaptive
Technology
Avoid a Reimplementation
Reduce Complexity and Control Risk
Improve Business Continuity, Service
Quality and Compliance
Establish Data Quality Standards and a
Single Source of Truth
Company Overview: Incorporated 2007  Helene Abrams, CEO
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Agenda
• Key considerations for IT and for the business
• Questions businesses going through a divestiture ask -
• What are we selling, and why?
• What data belongs to me, and how do I find it?
• Business changes by the rules – achieving agility
• What are the options?
• Reimplementation
• Separating data either within an instance or as a stand-alone
• Masking alternatives
• Conclusion
• Questions
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Objective #1
Understand key considerations for
businesses going through a divestiture,
and how to address them.
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• Seller’s perspective
• Why do companies divest?
• Sell low-performing business units
• Focus on high-growth opportunities
• Break up business units to increase business agility
• Reduce complexity from the business
• Buyer’s perspective
• Why do companies acquire?
• Value from new products and customers
• Synergies and cost savings in product development and administration
• Exponential value
• Minimal risk from new product development
Adding Value by Subtracting
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Divestiture
Objectives
Plan &
Strategize
Define
Execute
Validate
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Divestiture Lifecycle

• Objectives
• Define organizational objectives for divestiture
• Plan & Strategize
• Divestiture strategy – sell or spin-off
• Evaluate risk and rewards
• Identify and evaluate potential buyers
• Set timeline
• Define
• Identify sale method
• Determine what to divest – operating unit, products etc.
• Evaluate value for business being divested
• IT & Business drivers
• Execute
• Manage speedy closing
• Validate
• Validate results
Divestiture Lifecycle
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• What happens to the system containing data for divested
entities?
• What are the buyer requirements from system perspective?
• What are the seller limitations from system perspective?
• Are there clear requirements on who gets what data – seller v/s
buyer?
• What happens to historical data?
• What happens to master data?
• Does IT organization have tools to be able to meet both seller’s
and buyer’s requirements?
• Can the system requirements be achieved in required timeline
for closing?
Seller Perspective - System Questions
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• What system am I getting – platform?
• What data does it contain?
• What will be my integration strategy?
• How will this system fit within my organizational IT strategy?
• What do I need to do to manage short term expectations?
• What do I need to do to manage long term expectations?
• What additional work will be required after getting the divested
system from seller?
Buyer Perspective - System Questions
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Early Decisions – This Isn’t an IT Issue
• Determine criteria for divestiture
• Determine whether COA change, calendar change, asset
revaluation are necessary
• Determine if new legal entities or balancing segment
values are necessary
• Determine whether there will be a stand-alone instance
for NewCo or whether it needs to be consolidated into
an existing ERP instance
• Determine if OldCo’s instance needs to be purged, and if
so, what happens to the history
• What needs to be included in the Transition Services
Agreement (TSA)?
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Divestiture: Creating the New
Organizations
Review contracts
and licenses
Types of contracts:
• Service
• Software
Obtain new
hardware • Servers
• Phone System
Determine what
information is
needed in the
new system
Review master
information
• Data and numbering scheme environments
• Approvals may be dependent on current structure
•Determine if accounting structure needs to be
changed
Decide how to
treat historical
data
• Leave data with parent company
• Bring data forward with the new divested
entity
Determine how to handle
interfaces with third-party
systems
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Some of the Business Considerations
• Interfaces to 3rd party systems (i.e. tax, imaging)
• Reports, Interfaces, Customizations, Enhancements, Workflows
(RICE-W Objects) need to be changed
• Intercompany, internal, and split transactions
• Split of non-monetary accounts (assets, equity, bank accounts,
pre-paids)
• Adjusting periods, closing entries, reconciliation of balances
• Interim consolidated financial reporting
• Shared data from upstream and downstream systems, internal
to ERP, employees (tax forms, benefits), costing
• Security and responsibilities, validations, approvals changes
• License negotiation
• Service-level agreements
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Poll Question
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© 2015 eprentise. All rights reserved.| 16
Objective #2
Take a look at a reimplementation option,
separating data either within an instance
or as a standalone, and masking
alternatives

Divestiture Options
• Masking
• New implementation (reimplementation)
• Separating data within an instance
• End-dating responsibilities, some sensitive data
• Archiving (transactions only)
• Use a rules-based software
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Masking as an Alternative
• What is masking?
• Designed to eliminate the risk of breaching sensitive data when
copying data into non-production environments for the purposes
of application development, testing, or data analysis
• Used when sensitive data needs to be shared with non-
production users
• Appropriate for a specific field (or a column in a table) such as
credit card numbers, bank account numbers, social security
numbers, or healthcare information
• Masking does not operate at a “structure level” (i.e. legal entity,
operating unit, etc.) and doesn’t find related data. There is no
built-in intelligence.
• Oracle now allows “decrypting” of sensitive information
(credit card numbers, accounts, user passwords, etc.).
Instructions are widely available on the internet.
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What is Your Confidential Data?
It is the data that would hurt you if a competitor had access to it
• Customers – buying history, discounts, contracts
• Suppliers – costs, discounts, payment terms, credit limits
• Inventory – cost of goods sold, inventory turns, returns, quality
inspections
• Financial Information – balances, budgets, days sales outstanding
Finding all of the confidential data to be masked is like digging a hole with
a spoon. It requires knowledge of every table, and then filtering that data
based on the criteria for divestiture (legal entity, operating unit, or
balancing segment value). You would need to hide much of the transaction
detail, and then all processes may not work correctly.
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Masking is a Risk, Both for Seller and
Divested Entity Perspectives
Seller’s Perspective
• Can’t be sure to get all the confidential data-
especially what you don’t want a competitor
to see.
• Businesses need to spend time checking
every table and all the attributes.
• There are no rules that associate the data
with the filter criteria (masking won’t find the
suppliers that are not used by the divested
entity). That will need to be done with
custom code for each data type. The code is
pretty complex requiring many inner and
outer joins, and knowledge of all the
relationships.
• Split or shared data cannot be masked.
• Data coming in from interfaces won’t be
masked.
Divested Entity’s Perspective
• Masked data may compromise the
integrity of the data and the Oracle
processes (calculating balances,
depreciating assets, creating
payments).
• What happens to in-flight transactions,
internal transfers, or intercompany
accounting?
• How can you be sure that you get all
the data that was part of the sales
agreement (receivables, liabilities, etc.)?
• Data associated with the sold business
components may need to be purged
from databases simply to get the
reporting accurate.
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Masking is a Coding Task,
Done by a Development Team
• Define Mask Formats
• Pre-defined Masking Formats for ERP
include:
• This is not the confidential data that
needs to be removed for the divested
entity
• Not business driven, no understanding
of ERP
• Requires unit and code testing
• Many companies sell it as part of a
database administration tool for non-
production environments
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New Implementation (Reimplementation)
• Expensive and lengthy process
• Install hardware and software
• Define and configure business processes
• Configure applications
• Load and convert historical data
• Customizations
• Extensive documentation for all process flows and
customizations
• Extensive resource requirements
• Extensive testing requirements
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End-Dating responsibilities
• Revoke user access to business functions and data for an
organization
• Restricts user access to required data from UI
• Data can still be queried from the database
• Cannot be applied to a divestiture criteria with complex
conditions
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Archiving
• Use a commercial-of-the-shelf archiving solution to
remove required data
• Archiving solution may not know all the entity
relationships within a database
• Archiving is usually done to reduce transaction data
therefore not all data may be removed
• Cannot be applied to a divestiture criteria with complex
conditions
| 24

Poll Question
| 25

Objective #3
Outline an approach for a
successful divestiture that can be used by
both business and IT
| 26

Five-Part Approach for Success
1. Evaluate a rules-based engine
2. Prepare early
3. Create a transition team
4. Focus on core processes
5. Remember post-sale plans
| 27

Rules Engine Functioning
Desired Output
Metadata
Rules
Logic
| 28

Rules Engine Components
| 29

What Constitutes a Rules Engine?
Source: www.flexrule.com
| 30

Rule Example – Entity Relations
Operating Unit
(OU)
Items Suppliers Warehouse
Purchase Order
Purchase Items
Receipts
| 31

Rule Example – Divest Based on Items
Operating Unit
(OU)
Purchase Order
Purchase Items
Receipts
1 (Start)
2
4
5
6
7
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3

Rule Example – Divest Based on OU
Operating Unit
(OU)
Purchase Order
Purchase Items
Receipts
7
8
6
4
1 (Start)
5
2 3
| 33
9

Rules – Flexibility to Travel Different Paths

Prepare Early
• Determine the value of each area of the business
• Evaluate the strengths and weaknesses
• Capitalize on the strengths that will provide the greatest
value to a prospective buyer
• Begin to prepare a “due diligence” package for each
part of the company
• By product line, a region, a department, or a legal entity
| 35

Prepare Early - Due Diligence Package
•Why you are doing what you are doing?
•How does that tie into a long-term vision for the entity?Mission Statement
•What are the benefits, value, and ROI?
•Why would someone pay for this part of the business?
•What are the current assets of the business?
Value Proposition
•What are you selling?
•How are you pricing it?Product or Service
•Who is your market? How do you reach them?
•Who are your current customers? Why do they buy from you?
•Who are your competitors?
Marketing and Sales
Strategy
•What is the length of sales cycle, sales per month, revenue per sale, accounts
receivable timing, major suppliers and headcount?
Operations and Operating
Assumptions
•What is your five-year plan?Financial Projections
•If you sell this part of the business, who will lead the charge?
•Do you have an experienced team in place that can develop a strategy and
execute toward that strategy?
Management Team
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Create a Cross Functional Transition Team
Develop a plan and deliverables for the
divestiture - work with multiple teams
(business, legal, accounting, banking, IT and
HR).
Work on a plan to have divested entity’s own
infrastructure, systems, human resources,
financials and facilities to support operations.
For systems, determine who gets what data
and how open transactions will be handled.
Determine assets to be divided - fixed assets,
financial assets, and intellectual property.
Evaluate service contracts, leases, lines of
credit, supplier contracts, license agreements
and employment agreements for
renegotiation.
Transition
Team
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Focus on Core Processes
Revenue growth adds value and creates positive dynamics both
internally and externally that can help retain customers and talented
staff.
1. Give priority to customer-facing processes – sales, support,
order management
2. Design processes to present a consistent face to the customer
before and after the split
3. Create and staff interim processes to sustain the quality of
products and services through the transition
| 38

Post-Sale Planning
It’s not over when the sale is complete!
• Carefully manage the divested companies until
both companies achieve independent stability
• Manage both companies carefully to-
• Minimize disturbance in operations
• Continue without significant interruptions
• Capitalize on creativity
• Maintain excitement of building new business
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Poll Question
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Conclusion
• Clear objectives should be defined
• Planning is the key to success
• Collaboration between business & IT
• Clear understanding of seller’s as well as buyer’s
requirements
• Make technology work for you
• Use a tool that can guarantee success within the required timeline
• Rules-based divestiture is easy to manage
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Questions?
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Thank You!
Contacts
Ihtesham Uddin
734.564.6521
iuddin@eprentise.com
- One World, One System, A Single Source of Truth -
Anil Kukreja
951.468.5854
akukreja@eprentise.com
| 43

Who Does What, When, and How for a Divestiture?

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