Mergers & Acquisitions continue to be an effective way for companies to grow their businesses rapidly. Studies have shown that while many M&As have failed for different reasons, a major reason is that the CEO did not bring the IT department on board early enough, due to a lack of understanding of the critical role that IT plays in M&A deals. Successful M&A deals typically rely on strong IT support delivered by experienced IT specialists who understand the nuances of these types of deals, can perform appropriate technology due diligence and can plan a post-merger integration project. With sufficient advanced notice and proper involvement in the M&A process, IT can deliver enormous value and help to ensure a successful transition. The 3 key considerations listed below should be included in any IT-oriented discussion related to an M&A deal.
3 KEY CONSIDERATIONS
One: Collect requirements and evaluate any gaps in IT capabilities
The first consideration in merger integration typically occurs during the initial (or due diligence) phase, when IT must develop an understanding of all technological requirements created by the merger. This starts by considering requirements within the IT department itself. CIOs need to obtain a good understanding of the IT resources on both sides of the deal to decide how the two organizations can best fit together, where any possible cooperation can be found, and where integration risks may occur. This requires a survey of IT infrastructure and a plan for rationalizing resources and eliminating redundancies. Areas of analysis include:
• Hardware, software, and network systems
• Enterprise and departmental application and data platforms (e.g., ERP and/or CRM systems)
• Corporate programs for specific lines of business, products, services, and vendor platforms
CIOs must define how best to provide IT support for the company’s long-term growth strategy, including hardware and software for new product and service proposals, customer retention and acquisition, and entry or expansion into new markets.
Two: Prioritize Initiatives
Given that IT resource availability may be diminished during merger integration, technology leaders must be methodical in evaluating how resources are best deployed to support current operations while planning the merger or acquisition. When IT is involved in the process of integration planning early on, effective collaboration with the business teams can occur to ensure projects are properly prioritized.
Three: Create a unified Implementation Road Map
Once CIOs have identified priorities for both the IT department and the new corporate structure, they can translate this list into a road map, including sub-projects, detailed timelines, and contingency plans. The map will likely uncover redundancies across the prioritized initiatives as well as key gaps in the IT capabilities needed to carry them out. A well-developed map should include a plan to address those imbalances. Furthermore, it should highlight important conditions and success factors for each of the three steps.
CONCLUSION
With IT playing an overwhelmingly important role in today’s organizations, successful merger and acquisition integration requires close alignment of IT and the business side of a company before, during, and after the transaction. This type of approach dictates that IT communicate early and often with the business during all aspects of the M&A process. Frequent, frank communication between the two will generate a well-rounded view of the new company and a thorough understanding of its capabilities.
The Litcom Approach
Litcom is an independent source for IT due diligence. We have broad knowledge and experience in all aspects of IT management. Our association with leading industry research firms gives us practical data for benchmarking the target company’s IT spending and preparing a useful economic analysis. Our structured methodology allows us to deliver an assessment within short deadlines and our strict independence from technology vendors gives us an unbiased perspective that is essential for due diligence. Please contact us for additional information at: [email protected] or check out our M&A Due Diligence services at: http://www.litcom.ca/merger-acquisition-due-diligence/
