by Diana Bersohn

Why CIOs need a seat at the M&A table

May 21, 2018
CIOIT Leadership

Technology has become crucial to the success of the M&A deal, which means CIOs need to get off the sidelines and get a seat at the head table.

Prior to the digital revolution, mergers and acquisitions were primarily pursued to drive synergies and acquire targets similar to a company’s own organization. These traditional M&A deals were conceptualized and executed across the C-suite, but often left CIOs off the playing field.

But in today’s fast-changing digital landscape, business success is increasingly measured by the speed at which companies can implement technology that drives their business strategy forward. According to recent Accenture Strategy research, 47 percent of executives put technology and mobility at the core of their future growth strategies. (Note: I am an employee at Accenture.) As M&A fast becomes a vehicle through which companies advance their digital growth goals —whether it’s filling digital gaps or consolidating existing capabilities into a top-of-the-market offering — companies need to approach their M&A with a technology-first approach. The disruption and differentiation that digital technologies can create will make them imperative to any deal’s success for the foreseeable future.

For companies to successfully execute a tech-led merger or acquisition, CIOs not only need to get off the sidelines, but they also need a seat at the head of the table. CIOs must make their case by educating their C-suite colleagues on how and why technology must be at the heart of a M&A strategy.

Traditional M&A approaches have become obsolete

Technology has changed the game in any M&A deal, whether digital or traditional. From enabling an accelerated and better-informed deal process to improving post-merger integration, technology has become crucial to the success of the deal.

Take the pre-deal process. Analytics and artificial intelligence (AI) can help human deal analysts sort through vast amounts of data — from financials to company communications, social media and customer sentiment — much more efficiently and comprehensively than ever before. Research shows companies that use AI for M&A can even reduce due diligence time for specific tasks by 30 to 90 percent where applied, e.g., contract reviews.

CIOs can lead their companies to be victors in M&A by applying digital technologies to traditional deal processes, which gives companies a vital competitive advantage across the business. Based on recent Accenture Strategy research, many companies are already adopting a transformed approach for deals — and reaping significant value.   

  • 61 percent use a different pre-deal team and evaluation criteria for M&A investments.
  • More than half (56 percent) follow different valuation and cost models.
  • 49 percent use a different playbook.
  • 58 percent say technology is already allowing them to achieve targets and capture value faster in their M&A deals.

CIOs can help guarantee strong deal outcomes by veering companies away from outdated M&A approaches and establishing a new playbook that accounts for the changing world of deals.

Technology strategy goes beyond the deal

It’s no longer enough to just acquire or merge with digital savvy — companies’ M&A strategies must also provide a roadmap to fully integrate their IT platforms with new partners, so they are best positioned provide seamless end-to-end experiences.

Even though 44 percent of executives indicate that speed, cost and efficiency of core business systems are critical success factors for M&A, most companies still run on systems from decades ago. It’s imperative for companies to become more digital themselves and migrate to newer technology architecture in order to integrate newcomers as rapidly and efficiently as possible. Accenture Strategy research show IT integration issues are now responsible for 40 percent of M&A deals failing to deliver benefits.

By applying modern technology across the business system, CIOs can help companies reap full benefits from both digital and traditional M&A deals alike. The added benefit? It’s often M&A that pushes U.S. companies to digitalize more broadly — for example, 88 percent of executives agree or strongly agree that M&A activity has forced their company to develop a better data strategy.

The path forward

To help guarantee the success of merger integrations and post-merger transformations, CIOs can work with C-suite players across the business to do the following:  

  • Adopt a tech-led approach to M&A. Forward-thinking CIOs can help their company develop a distinct M&A strategy fueled by technology. From target screening to valuation, discovery and negotiation, leaders see a modified playbook as an advantage.
  • Use M&A as an opportunity to modernize technology.Rather than taking the conventional approach of integrating first and modernizing later, redirect critical investments to outdated systems at the outset.
  • Transition to future platforms that enable vertical and horizontal integration. Using cloud, analytics, virtualization, master data harmonization and as-a-service technologies can increase integration speeds and reduce costs by up to 30 percent.
  • Don’t go it alone. Integrating platforms with business partners is more critical than ever to provide seamless end-to-end customer experiences. More than 80 percent of executives agree that partnerships are required for modern technology adoption. CIOs can bring in partners early during M&A integration to share platform costs, spread risks, and accelerate transformation timelines.

CIOs have a vital role to play in pushing their companies to transform their deal strategy and post-merger integration plans for the age of digital. With CIOs in a leading seat at the deals table, companies can unleash the power of new acquisitions to drive digital innovation and growth for the long haul.