In his poignant article for Canadian Business entitled “The Last Days of Target Canada“,  author Joe Cataldo, describes the birth, short difficult life and painful death of Target Inc’s expansion into Canada.

The story is instructive for any business person to read and reflect on. However, there are three specific takeaways that apply to M&A deal and integration teams.

Know Your Systems

One of the fateful decisions the Target Canada team made was to forgo the use of the existing world class, US based, retail IT system and instead go with a new off the shelf ERP system and vendor. The US system did not support foreign currency and had some other short comings related to business in a new country.  In creating the new system to manage purchases, ordering, distribution and inventory control, enormous amounts of data regarding thousands of products had to be ported. Assumptions about the data led to gross inaccuracies which resulted in huge inventory problems and impacted stock available at new stores.

From an IT perspective, extending a known is sometimes more doable and more predictable than starting over, even with a reputable off the shelf vendor.

When an M&A transaction involves integration of data heavy systems detailed analysis is needed to uncover potential incompatibilities, assumptions and requirements. In the Target Canada case, simple issues such as the use of metric vs. english units and the order of package dimensions (length, width and height) caused considerable problems with data impacting factory orders, store inventory and distribution to stores.  By knowing some of the fundamental requirements up front in the deal planning process a more realistic schedule, and manpower framework can be established.

Bound your Scope

Due in part to the pressure of a $1.8 billion investment in lease purchases for Canadian real estate, the Target Canada team was tasked with the goal of opening 100+ retail locations in just over 2 years. This work not only included the retail locations but three distribution warehouses as well. This was a ‘from the ground up’ attempt to be fully functional at scale and profitable within three years.  In hindsight, this scope proved extremely difficult to manage.

In a small or medium size business transaction, scope of the deal is an important factor in setting expectations and forming the final integration team. Even when the scope of the deal seems well bounded, there needs to be allowance for surprises. The Target Canada schedule had no room for that. There is nothing wrong with setting stretch goals. However, they should be rooted in a realistic assessment of probability of success.

In an M&A deal time line, a layered planning approach for complex system integrations may help form more achievable milestones.

Schedule some reality

Scope and schedule are dependent variables. In the Target Canada situation an expansive scope met with an un-realistic implementation schedule, ultimately leading to bankruptcy declaration for Target Canada. Overly aggressive (and un-realistic) schedules can doom a deal from the start.

An M&A deal that is a large investment for the acquirer can place high pressure on the implementation teams to deliver promised financial results.

Prudent M&A deal teams will fully consider all aspects of a acquisition or merger and form schedules to match the complexity they are dealing with. M&A deal teams need to push back on investors and executives where scope and dictated timelines don’t mesh.