Understanding the strategic value of IT in M&A
Whether you are a small business or a multinational company, merger and acquisition could be complicated for everyone.
With the number of mergers and acquisitions expected to rise over the next few years, many companies are looking for ways to improve their M&A skills - especially their ability to assess and integrate target companies successfully. We’ve all heard about deals where the stars seemed aligned but synergies remained elusive. In these cases, the acquirer and target may have had complementary strategies and finances, but the integration of technology and operations often proved difficult, usually because it didn’t receive adequate consideration during due diligence.
One reason is that executives from IT and operations often aren’t included in the due-diligence process, preventing them from offering valuable input on the costs and practical realities of integration. Executives can’t hope to forecast the savings from merged supply chains, for example, without a deep understanding of what’s required to integrate two companies’ information systems. Too often, this key information is overlooked. In our work on postmerger management, we have found that 50 to 60 percent of the initiatives intended to capture synergies are strongly related to IT, but most IT issues are not fully addressed during due diligence or the early stages of postmerger planning (exhibit).
IT is crucial to successful merger integration and supports many important integration activities. However it is often identified as a root cause of failed M&A and divestiture efforts due to poor IT platform and organization integration, inefficient due diligence and failure of IT to enable business synergies.
Day one key questions
If you answer yes to any of these questions, there’s room for improvement to smooth postmerger integration efforts.
1. Applications and technology architectureDo you rely heavily on custom or proprietary technologies?
2. IT infrastructureDo you have many small data centers in expensive locations?
3. Labor productivityAre your processes different in different locations?
4. SourcingAre many small vendors providing materials that could be sourced from fewer, larger vendors?
5. Demand managementDo business leaders fail to prioritize IT needs and assert that “everything is important”?
6. Organization and governanceDoes IT management spend a lot of time putting out fires?
Take over risk controlRisk and disruption can be dramatically reduced with research, planning, and communication. IT planning and management is critical to a successful, smooth changeover to a company restructuring due to M&A. To ensure that oversights are avoided, learn what your business should be paying attention to, including:
- IT integration approach
- IT Contract management including licenses
- Users transition including their devices
- Network and server transitioning
- The management of domains
- How infrastructure is currently managed
- Regulatory and compliancey
- Post merger activities