Assessing the Impact of Mergers and Acquisitions Activity on CIOs

In a departure from my usual list of CIOs moving into new positions, I’m devoting today’s blog to elaborating on some of the points I made in the Trendline I wrote for the February 1, 2006 issue of CIO, After the Merger, Who’s In, Who’s Out. With merger and acquisition activity expected to increase this year, I think it’s important for CIOs to understand how companies decide which CIO to keep on board after a merger or acquisition so that they can watch out for signs that might indicate they’re not in favor and can thus prepare themselves to start looking for their next big thing. 

In a merger of equals, where two companies combine to gain efficiencies, boards of directors will chose the CIO who has had successful experience integrating companies that have merged in the past, says Shawn Banerji, a recruiter with Russell Reynolds. He says boards tend to view prior success as the greatest indicator of future success.  If neither CIO possesses that experience, boards will recruit one who does.   

Banerji says selecting a CIO based on their integration experience is one of the strategies boards use to manage the risk associated with M&A activity.  If a botched integration effort hampers the efficiency gains or synergies that the two combining companies promised shareholders leading up to the merger, Wall Street won’t be too happy.  The AOL Time Warner merger is a great example of a deal that promised great things for shareholders that never materialized.    

Even if you have worked on merger-related integration projects in the past, corporate politics, your relationship with your CEO, and your CEO’s view of IT could undermine your chances of being picked, even if your company’s CEO is the one who gets tapped to lead the combined company.  “IT is still viewed as a step-child in many companies,” says Banerji.  So the CEO may decide to give your job to the other company “to throw them a bone,” says Banerji, if he’s decided to keep, say, his CFO, COO and General Counsel, in their existing positions.    

Banerji also told me that age is another dirty little secret in merger considerations.  If one of the CIOs under consideration is nearing retirement (say in his or her mid-to late 50s or older) their chances of being tapped to lead IT for the combined company grow more slim. Why? For a couple of reasons. One, as I wrote in my Trendline, companies want someone with several years ahead of them who will be able to see the post-merger integration projects through to completion.  Two, because companies are thinking about their succession planning and they want to appoint individual who can easily work for another ten years and grow into other roles.  And three, if the elder CIO has held a long tenure with his company, the board and management of the combined company might decide it’s to bring in new blood.  Pretty sobering, huh. 

We’ve written a lot about the impact of M&A activity on CIO’s careers.  I wrote another Trendline on this topic in 2004, and my colleagues have written about what it’s like to get the job post merger and what it’s like to be on the losing end of the deal.   

Have you switched jobs as a result of M&A activity? Use the feedback form to share your thoughts and experiences.  Also, did you find this posting helpful or insightful in any way? Let me know.