In my last article, I shared important insights that can help companies achieve success in mergers and acquisitions (M&A) IT integration. These key areas, such as better strategy, improved communications, more experienced internal teams and stronger external advisors, have created significant leverage to gain critical traction toward success.
In this article, we will spend some time where more CIOs are keenly interested: how technical innovation is driving revolutionary results for overall M&A IT integration. Though we will focus on M&A, many of these technologies are also highly relevant to other types of transactions, including divestitures and spin-offs.
Obviously, technical innovation is driving massive change across all areas of the IT spectrum. High-speed innovation is the norm, and disruptive technologies are reaching mainstream adoption on a near-constant basis. M&A IT integration is also being disrupted, and several key innovations are dramatically changing the manner in which integration projects are planned and executed.
How are companies breaking the paradigm in this area, and what technical innovations are they leveraging?
1. Cloud and software services
Cloud computing and software as a service are two of the most important innovations impacting the M&A environment. Historically, technical integrations would likely require a data center and/or an application migration. The perils of these technical projects, including all of the risks with networking, interfaces, storage, security, etc. are well-known to CIOs. Instead, most cloud providers and software companies are now well-versed in data center and application transitions, and have proven methodologies to enable migrations to be executed quickly and effectively, with manageable levels of risk. Of course, every migration is different with varying levels of complexity and risk, but the trend to cloud-based platforms is clearly simplifying the overall technical migration process in most cases.
2. Data and analytics
The advent of analytics and data as core to decision-making is now critical to valuations, growth and integration at companies, highlighting the central role IT plays at all levels of transaction planning. IT is critical in creating integration approaches that can build value from data and reporting capabilities in both companies where the sum is greater than the parts. For example, most transactions now leverage the “best of the best” approach to management and operational reporting, enabling executives to have better overall access to information across the newly created enterprise. The tools will vary, but the demand is the same: real-time information to the detail level on both sides of the transaction, from Day 1 forward.
3. Cybersecurity and risk management
Cybersecurity is becoming a central component of deal diligence (and subsequent integration). In many cases, cybersecurity is reaching Board-level importance, as highly publicized breaches are raising awareness around the significant risks involved. Though security protocols have clearly improved, the risks are increasing even more rapidly. In addition, more and more firms are keenly focused on “big data,” thereby generating massive amounts of potentially sensitive data that must be assessed, secured and managed throughout the transaction. Security issues that used to be the CIO’s responsibility now also frequently require specialized CISOs who are experienced with different transaction scenarios.
Technology is becoming key to accelerated integration and value creation through innovations like robotics, where operational integration and automation can be achieved quickly. “Robotics” can cover a very broad swath of technical functionalities, including autonomous automation in manufacturing and back-office functions where standard processes enable systems to be most suitable. In a case where one company has superior automation capabilities, whether in-house or through third parties, those competencies can be leveraged across multiple entities to gain economies of scale, with a lower relative cost to implementation.
Leading companies are leveraging social media technology to conduct more comprehensive diligence on targets, and also leveraging the right “sense and respond” mechanisms throughout the integration. These can be external (Facebook, twitter et al.) or internal (Yammer, Slack, etc.). Corporate communication teams, such as Investor Relations, Human Resources or other groups, are both utilizing the outbound channels to deliver messages, as well as watching the inbound postings to reveal communication issues and gaps that need to be addressed. In fact, our experience clearly shows that many integration challenges begin with poor communication. Social media outlets provide an important tool that enables leaders to directly share messages with a broad audience like never before, and quickly adjust these messages as needed.
Business partners, both at the strategic and operational level, are consistently developing and deploying better tools to assist with the integration effort. Examples abound in this area, such as refined operating models, updated templates, enhanced project management methodologies and real-time reporting capabilities, with many of these tools ready to be deployed as soon as projects are initiated. Many are web-enabled, allowing clients and users alike to share information immediately, without resorting to a weekly reporting or information-sharing cadence. Additionally, executives are able to see the status of projects as they are executed, providing evermore transparency to the overall process. Inevitably, with greater visibility and reporting provided through better tools and processes, accountability increases among the execution teams and leads to better overall results, typically in less time.
Lastly, an innovation discussion in this arena would not be complete without mentioning the immense impact of mobile tools. The ability to share information and communicate instantly, with all of the tools previously mentioned, has permanently and dramatically altered the manner in which we execute IT projects, and that has naturally affected the M&A landscape. The real question for mobility will be “What’s next?” and how can we take advantage of it.
A future of possibilities
Given everything we have seen in the past few years, what is on the horizon that could truly change our working world? Certainly, each of the areas mentioned, especially robotics, will play an increasing role. Other purely technical areas will continue to advance, like storage, networking, security, application development and so on.
Though technology adoption will ebb and flow, the innovations listed are clearly here to stay. In addition, artificial intelligence will likely play an even more prominent role in not just analysis, but decision-making as well. Concepts that seem like science fiction today will become tomorrow’s reality. M&A integration, just like all other areas dependent on IT, will never look the same.
The M&A IT space is changing rapidly, and the technical tools and methodologies being applied offer buyers and sellers tremendous opportunities to reach their overall transaction goals. As synergies are identified and financial targets are agreed, IT teams will be expected to quickly deploy the latest technologies to maximize return to shareholders. IT is ever more important, visible and, frankly, instrumental in delivering value to the bottom line. Fortunately, with innovations like these driving new and exciting capabilities, IT teams and leaders will clearly have the chance to position themselves as critical levers to the overall success of the endeavor. As deals close and companies move to the integration and consolidation phase for their new enterprise, IT will become an even more critical partner, rather than a mere cost center, in the realization of the company’s financial and transformation goals. And people called us just a bunch of geeks.
I want to extend a special thank you to my colleague Sid Khosla, who was a key contributor for this article.
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