Putting IT at the centre of M&A

Tim Patrick-Smith, chief information officer at Getronics, discusses the importance of factoring IT into M&A processes.

Few activities in business are more fraught than Mergers and Acquisitions (M&A). No matter how smoothly the process runs, from the moment a takeover or merger is announced, both parties are placed in a strange business limbo where uncertainty rules.

Staff, customers and partners are naturally nervous about the effects of any deal; investors, both current and potential, want a swift and successful conclusion to the deal; while eagle-eyed competitors wait watching in the wings for an opportunity to steal market share from any delays or complications that result.

Given the serious consequences that obstacles and delays can have on M&A activity, you’d expect one of the most complex aspects of modern business – IT and its associated infrastructures – to be central to any discussions or plans concerning mergers or takeovers. Yet it is not unusual for IT to be neglected during M&A, even to the extent of senior IT executives being excluded from the due diligence process. Indeed, a recent survey by Deloitte found that fewer than 30 per cent of companies actively involve IT in pre-close planning during M&A activity.

It seems madness that not only is IT not represented during M&A, but that it is not regarded as one of the most important voices in the process. The growth in technological complexity, together with the last decade’s trend towards greater centralisation and consolidation of IT systems, means that untangling and interweaving separate organisations’ infrastructure is one of the biggest stumbling blocks lying in the path of any successful M&A. Furthermore, if not adequately addressed at the outset, it raises the spectre of potentially catastrophic IT failures – such as systems downtime, integration failures or security breaches – further down the line.

It need not be this way. IT should be at the heart of the decisionmaking process associated with any M&A, starting with due diligence procedures. Anything that businesses can do to align systems and processes as far as possible in the leadup to the ‘moment of truth’ and identify any potential IT integration issues in advance will save time and resources.

This is not to say that every potential technology integration issue can be anticipated, or that there will not be costs and delays in bringing two very different IT estates together into one entity. What is does mean is that both parties are as well prepared as possible to weather any problems that arise, and that from a legal, business – and indeed, ethical – perspective, they have thoroughly followed due diligence best practice. This naturally requires CIOs and CFOs to work closely together to ensure a clear budget is mapped out and agreed to achieve the necessary IT integration roadmap and timescales.

The responsibility for managing IT integration does not lie with the head of department alone, however. As technology continues to advance at an ever-faster pace, it requires ever-deeper technology expertise in new areas such as cloud computing and application management. Once a business has its integration roadmap defined, they need to consider what skills to bring on, or to outsource, to ensure your teams are fully equipped to deliver what’s required.

Paradoxical as it might sound, but organisations can also treat M&A as an opportunity for the IT department to innovate. Today, many businesses restrict themselves due to prior investment in legacy technology, simply looking for the most cost-effective way to bolt together two systems that were never designed to be linked.

Businesses need to resist this course of action and approach M&A with an open mind, and a willingness to consider new ideas. A few years ago, this would have necessitated a wide-ranging ‘rip and replace’ of technology; clearly, that is one of the last things that’s needed before two companies merge. Thanks to modern cloud technologies, however, businesses needn’t take this approach.

Cloud services sitting on top of existing infrastructure enable companies to cost-effectively experiment with new approaches to ongoing business challenges, such as using cloud computing to analyse and interpret big data trends. In addition, cloud services and smart devices deployed in the right way allow mobility to be used as a catalyst for change, not just a facilitator of remote working.

Organisations that factor IT into their M&A processes from the very beginning will be the best placed to assess the importance and value of the CIO not just to business operations, but to its long-term strategy too.

 

Praseeda Nair

Praseeda Nair

Praseeda was Editor for GrowthBusiness.co.uk from 2016 to 2018.

Related Topics

Early Stage Funding