M&A For the CIO

Over the next several years I predict that there will be more restructuring of businesses through mergers and acquisitions to gain market share, absorb competitors, acquire products and rationalize business to gain greater strategic focus.

As the CIO, are you ready for the M&A process?

When a merger or acquisition first becomes a likely probability, as CIO you must take the steps that will allow IT to be successful when integrating an acquired firm into the business. Here are 5 key areas to help you in planning M&A.

1. Pre-planning

• Get a seat at the due diligence table. IT will be both a source of cost savings through consolidation and a foundation for future cost and revenue synergies. As CIO you should be involved day one to provide a realistic assessment of what is possible and what is not.
• Assess your current IT environment. Current applications can be a source of risk to the M&A success. Assess the entire situation and ensure your environment is scalable. If not, determine what needs to be improved?
• Ensure your IT department has the skills and structure to manage the integration. Does your team have the skills and experience to handle such a project? If not, what skills will you need to be successful?
• Develop integration principles and templates for due diligence and planning. Plan, plan, and plan some more. Create checklists and templates to help in the integration.

2. Due Diligence

• Assess the acquired company’s IT assets and develop an integration strategy. Your team must gather as much information about the target firm’s IT organization.
• Define the decision-making structure. Governance for integration planning and decision-making should be established early on and must include executive sponsors that can break through decision-making logjams.
• Build your integration project team. The team will be responsible for planning the integration and the execution of the plan after the effective date. Forming this team early gives them insight to the information and the integration strategy, maximizing knowledge transfer.
• Determine how to handle acquired IT staff. If you need to retain staff from the acquired firm’s IT organization due to needed skills or headcount this should be determined at this stage.

3. From Day 1 To Day X

• Prioritize IT work. Prioritize your IT department’s workload. M&A integration will take priority. Non-essential projects should be deferred.
• Stage integration deliverables. Set milestones for various phases (i.e. Day 1, Day 30, etc.)
• Plan to the lowest level of detail. All risks must be identified and mitigation strategies developed.

4. Achieve Technology And Process Synergies

• Move aggressively on technology consolidation to capture easy savings. Drive technology consolidation, such as consolidating data centers, rationalizing vendor contracts, and renegotiating software licenses. These are quick wins that will provide immediate cost savings. Balance cost savings against risks and the impact on operational stability.
• Application rationalization. Determine which applications to keep and which to remove.
• Processes are the key to acting and looking like a single organization. Processes such as service desk, procurement, security policies, and software development must be stabilized and standardized to achieving organizational stability. Process consistency is a major element of the business’ perception of IT.

5. Staff Retention

• Staff retention. When an M&A is announced, the initial reaction of IT staff at both companies will be concern for their jobs. How this is dealt with determines whether you have a committed workforce.