IT and Technology at the heart of business value creation
This article, published by Affiches Parisiennes, presents the comparative and complementary views of Aroma-Zone and PAI Partners on the IT/Tech challenges and key success factors in mergers and acquisitions, highlighting the critical role that IT and technology strategies play in the different stages of M&A —acquisition, ownership, and exit preparation.
Eight Advisory’s Technology & Transformation team recently organized a round table to illustrate the results of a study entitled “IT/Tech M&A: what are the challenges for investment funds in managing their holdings”, carried out this year. The discussion brought together Sabrina Herlory-Rouget, CEO of Aroma-Zone, Marc Boullier, Managing Director at PAI Partners and Luc Declerck, Managing Director at Bord of Cyber.
The discussions, introduced by Eric Demuyt, co-founder and Managing Director of Eight Advisory, and moderated by Jean-Christophe Fuzzati, partner of the Technology & Transformation team, and Adrien Kassel and Béchir Aissi, respectively Director and Senior Manager in the same team, highlighted the challenges, opportunities and risks associated with technology at every stage in the life of a company owned by an investment fund, from acquisition through transformation to exit.
Tech is an increasingly important factor in the considerations of investment funds
Marc Boullier opened the debates by pointing out that the role of IT and Tech in the holdings of an investment fund is anything but anecdotal. “Tech is now one of the components that needs to be looked at” in mergers and acquisitions (M&A) for a number of reasons,” he said. “Technology really needs to act as a catalyst for the business. We need to look at whether the IT strategy is in line with the overall strategy of the organisation. IT now plays a central role in the valuation of an asset. It is no longer just an operational support, but a decisive lever for growth and competitiveness. As a result, IT strategy is becoming an essential element in convincing investors,” he added. The Managing Director at PAI Partners also emphasised the importance of resilience, which “includes everything related to business continuity in the event of a crisis”, as well as predicting recurring costs to avoid unpleasant surprises after a transaction has been completed. “It is crucial not only to assess the total amount, but also to understand the overall cost structure, as poor management of these costs can lead to significant overheads in the long term”.
Cybersecurity at the center of our concerns
Marc Boulier, emphasised an important pillar: cyber security. “At PAI, we have set up dashboards that give us an overview of the cybersecurity performance of all our holdings and highlight potential vulnerabilities. This is interesting because whereas in the past, audits were carried out on an ad hoc basis, usually a few months before entering the divestment phase, today’s resources, and AI in particular, allow us to ensure continuous monitoring and provide us with a more holistic view of performance, throughout the period in which we hold an asset.” This introduction to cyber security was echoed by Jean-Christophe Fuzzati. “We are increasingly systematising technological due diligence and are often asked to strengthen our analysis of the cyber security maturity,” he commented.
Luc Declerck continued: “The current geopolitical context requires increased vigilance. Recently, an employee in Hong Kong made a transfer of 25 million dollars following a video call from his superior, which was in fact the result of a deepfake, a technique that simulates a person’s facial movements. With AI in particular, the brand new methods and more elaborated scams of hackers are yet to come. In carve-out and post-merger integration (PMI) situations, we are more vulnerable because we are more exposed. Therefore, cyber security is crucial, and must be a priority in any transaction context.
Aroma-Zone leverages Tech for in LBO context
Sabrina Herlory-Rouget spoke about the history of Aroma-Zone, which she has led since 2021. As the online market leader for marine collagen and hyaluronic acid, this company, which democratises natural beauty, has been growing strongly for several years. “The situation was complex when I arrived and we had to go to great lengths to replatform the website. This was a priority because the majority of our turnover was then generated via the internet, and the old website was not up to our ambitions,” says the CEO of this company, which has a unique business model with a value chain that is kept in-house, from research & development and materials sourcing through to the distribution network. In addition, Aroma Zone is an omnichannel company that relies on its website and its own network of directly-operated stores.
Once the website migration was complete, Sabrina Herlory-Rouget and her Chief Information Officer (CIO) Laurent Serrano, who was present at the event, asked themselves what the company’s next IT priorities should be. “In a context characterised by a significant technological legacy, with regulatory constraints that need to be met and strong growth that requires the support of our information system, where should we start? “, said the CEO.
To achieve this, a three-year IT master plan was drawn up with the help of Eight Advisory. “It was important to have a clear, shared vision. We had to channel and prioritise the many requests from the different business in order to keep the pace in line with our objectives, bearing in mind that, unlike a large company, we have a different relationship with time, and even more so in a context of hyper-growth. We need to move from vision to execution, while remaining agile to keep up with the pace of change imposed by market dynamics and our customers’ expectations. It was therefore essential for us to acquire the right skills internally, in particular by strengthening our IT department with a unit dedicated to transformation and by recruiting a new Chief Information Security Officer (CISO) and a Director of Transformation,” says Sabrina Herlory-Rouget.
Three key points for business ambitions: ROI, cost control and sparring-partners
To achieve Aroma-Zone’s ambitious goals, three points were crucial: “In a context of strict cost control, it is important to focus on projects that bring real added value. This means concentrating on the essentials and maximising the return on investment (ROI). To achieve this, we have structured and documented a detailed IT roadmap. Each expense is carefully projected, with its relevance and impact on the business constantly scrutinised.” Marc Boulier added: “It is interesting to see that there is so much at stake for a company today that it is even a question of evaluating value for money, that is to say a kind of ROI/cost estimate in terms of guarantees and risks. The costs as such are secondary, and it is precisely because the technology offers so much potential for a company that this perspective is so relevant.”
Another key point for Sabrina Herlory-Rouget when defining her IT strategy: sparring partners. “It was also crucial to get support. This includes not only the investment fund, of course, but also external consultants such as those from Eight Advisory, who bring a cross-functional vision, expertise and benchmark with other contexts.”
In conclusion, the CEO of Aroma-Zone outlined the company’s next strategic priorities. “We are continuing to work on our existing systems while focusing on projects that are necessary for our growth and that will allow us to further automate our processes. Data is also one of our priorities. We see enormous potential in data to write our brand story, especially as we continue to pursue our strategic thinking in the field of artificial intelligence and move towards an extended enterprise with greater performance and productivity. At the same time, we are exploring hyper-personalization with the aim of generating additional revenue by leveraging the work we have done in the area of data architecture”.
Tech due diligence plays a crucial role
Investment funds usually hold an asset for a few years, support the growth of the companies they have invested in and then sell the capital of these companies. Marc Boullier concluded this round table on Tech Due Diligence (DD) by highlighting the key role it plays in these M&A operations to emphasise the value of the transformations carried out. He said: “Tech DD is an important tool in the exit phase. On the seller’s side, it helps to prepare management by identifying critical issues and creating contingency plans. This provides a clear and realistic view of the challenges ahead, making it easier to anticipate potential problems and reassure investors, helping to take the pressure off the transaction. Consulting companies such as Eight Advisory are necessary because they are familiar with this type of exercice and can support employees who are them rarely involved.
The Managing Director of PAI Partners continued:
Read the full article by Maxime Monniotte published in Affiches Parisiennes on October 17, 2024.
