by Ashish Gupta

4 steps to navigating the M&A process

Mar 13, 2011
CareersIT LeadershipIT Strategy

Any CIO who has been through the complex mergers and acquisitions (M&A) process before will understand the consequences that come from not having a clear strategy for integrating IT systems. Having an unclear strategy can have huge implications on the actual bottom line of the business, yet so many companies still consider IT as an afterthought of the M&A process. Recently, we have witnessed a surge in M&A speculation, with the likes of the LSE/TMX exchange takeover deal.

The result of this speculation has led to much debate and discussion about how fast or slow the IT integration process should be. My personal opinion is that the faster you get the integration done, and the more involved the CIO is with the process, the better it will be for both parties.

It is also important that the CIO looks to explore new ways to position themselves as a key cog in the complex M&A wheel.

When the CIO and their team are around the table with the finance or marketing teams, everyone has good reasons for why their version of the business integration process is the quickest and most scalable.

Given the importance of data, information and analytics to any organisation, CEOs are expecting their CIOs to play major roles in the redesign and enablement of new business models.

Here is a perfect opportunity for CIOs to step up into a leadership position and work with their partners in the business to truly integrate the best parts of each of the legacy processes.

There are a number of steps CIOs need to take to move into this leadership position:

1 Be part of the M&A team In order to achieve this leadership position and successful integration, the CIO must work and build a relationship with the M&A team right upfront. If the IT integration team is not part of the M&A process right from the due diligence phase onwards, then the strategy could unravel.

Integrating systems and processes is very complex and if not carried out correctly, can have a huge impact on the entire day-to-day performance of any business.

For example, the acquired organisation may decide to use a project management process to send out invoices to their customers. In contrast, the acquirer may adopt a manual process handled by their finance department.

This can be a major point of concern because the IT team members who work closely with the overall M&A team will require deep and thorough understanding of the invoicing process in order to align their applications correctly.

Therefore, from the CIO perspective, the best way to handle this process is to develop an IT risk assessment document and ensure the mitigation strategies are embedded into the overall M&A framework.

2 Vet the apps portfolio There is also the fundamental issue of whether to categorise applications and integrate them in a phased manner. All organisations have numerous applications, which have been developed over many years. Some, like email, are lifeblood applications, and others have been developed to address a bespoke business problem.

In theory, a business integration project should provide the CIO with a great opportunity to clean up their application portfolio and develop a plan to retire rarely used applications. In general, the strategy should be to integrate the business critical applications, into the lifeblood category.

This includes enterprise resource planning (ERP), Invoicing, HR and financial applications. This will make it much easier to integrate the applications supporting ancillary business processes like executive travel booking.

3 Strengthen the infrastructure Integrating IT does not start or end with integrating applications. It starts with integrating the infrastructure like networks, telephone systems. This goes well beyond applications with IM and chat support, rolling out help desk support and email setup.

There are one or two common sticking points that organisations often face with integrations and they need to be ironed out by establishing how and when the IT team is going to support the integration in a documented way: – Develop clear templates and deliverables at each phase should also be taken into consideration. The CIO has to evolve the IT strategy with the business phases. IT can only be effectively aligned if each phase of the strategy has a clear set of pre-defined documents which can be used by any team member without too much of knowledge transfer. – Highlight the major risks in the process of integration, and then suggest an ideal timeframe for completion based on all the factors in the due diligence phase. – Establish a clear step-by-step project plan for integration should be developed as part of the signing and closing phase. – Make sure documents should be in place to report weekly during the post signing process, and stakeholders should also be able to address the major challenges right away.

4 Maintain the integrity of your team Perhaps most critical area that CIOs should be fully involved in is the structure of the new IT department. Unless the acquired company will be a stand-alone entity, most organisations will have only one leader, so it’s important to think clearly about how you want the staff make-up to look, post-merger.

CIOs should look to estimate how many people they will require incrementally within their team by assessing skills and workloads. Whatever the situation, CIOs must keep in mind, there will be a period of time when it’s critical to retain the acquired team.

CIOs have the opportunity to transform their role from manager of the IT cost center to a recognised business leader who not only delivers operational efficiencies but who also drives innovative change and enable sustainable business value and growth.

In order to achieve this, they must strike the right balance between building the relations with the M&A team and demonstrating the broad range of ways in which they can make major contributions to business strategy and execution.

Ashish Gupta is VP and head of EMA at HCL Technologies

Pic: cheryl.dudleycc2.0