What IT Leaders Need to Know About Getting Mergers Done Right
Whether it's a shotgun merger or a planned acquisition, chances are you're not ready for it. Here's how to change that.
Tue, December 23, 2008
CIO — In good times, mergers and acquisitions are often driven by dreams of synergy, the idea that two successful companies can unite to capture a bigger piece of the market and be more profitable through economies of scale. In bad times, they can be driven by desperation, with one company leaping into the arms of another to avoid collapse.
In the past few months, we've watched mergers between distressed financial institutions arranged over a weekend, with the federal government playing matchmaker to address a severe financial crisis. The rushed nature of these transactions presumably means that the companies skipped some steps in the normal merger and acquisition planning process. Ideally, the parties to a merger go through due diligence to assess each others' strengths and weaknesses, which includes examining information systems and networks to assess the likely length, cost and feasibility of systems integration.
For the CIO to be intimately involved in that process is a best practice. Or so says every CIO. But in reality, that doesn't happen often enough, even in the absence of an economic meltdown. According to a 2007 study, "Wired for Winning," by Deloitte, fewer than 30 percent of companies get IT involved in the planning process before a deal is closed. The study also found that this lack of involvement has serious consequences. In one case involving a global manufacturer, IT integration costs exceeded premerger estimates by more than $100 million. CIOs feel the pain: Only half of respondents to our 2009 "State of the CIO" survey said they are involved appropriately early on in mergers and acquisitions.
So face it. The CEO and the board, in hot pursuit of a market opportunity or acting in response to competitive pressure, are likely as not to stampede past the CIO and set goals for the transaction based more on back-of-the-napkin estimates than thorough study. Even when the CIO is intimately involved, he probably won't have veto power over the deal. Instead, the CIO's role is more often to set realistic expectations for how long integration will take and what it will cost. Here, CIOs who have been through multiple mergers and acquisitions share their best advice for what to do when a deal is less than ideal from the IT perspective.
