847.849.2800
Contact
PwC’s 2023 M&A Integration Survey found that just 14 percent of respondents reported achieving “significant success” in a merger or acquisition. The “secret sauce” to their M&A success? A whopping 88 percent point to the importance of IT integration.
Despite that, the fast-paced world of mergers and acquisitions often means that information technology concerns take a backseat to strategic business objectives during due diligence.
This oversight can be a costly mistake.
Merging the Technology
In today’s digital economy, IT is no longer a support function; it is a strategic asset. The IT systems of the buyer and the acquired company will include anything (and quite likely everything!) from SaaS cloud-based tech to proprietary applications, technology stacks, databases, licenses, and more.
And it’s not just about the technology that runs business processes. These also are the systems that enable employee connections — that might be Slack or Microsoft Teams or a proprietary communications platform — and the systems that keep everyone on the same page, such as the project management platform, Monday.
Understanding the IT operations of the target company before the deal is made makes it possible to begin planning the IT integration process long before the deal closes.
The Role of the CIO in an M&A Deal
The role of CIO and Information Technology in mergers & acquisitions is increasingly important. The earlier it becomes a part of the process, the better things will go when it’s time for post-close consolidations of databases, facilities, tech stacks, and other IT infrastructure.
And, as another finding of the PwC survey shows, experience matters. In all cases, at least two-thirds of the respondents pointed to the importance of experienced leadership in increasing the chances of a successful merger.
In our gig economy, finding the IT leader you need is easy. You can contract with an interim CIO who will be hands-on full-time during due diligence, identifying potential synergies, and creating the roadmap for successful IT integration. Or you can contract with a part-time or fractional CIO who will work a few hours a day or a few days a week for an indefinite period as the companies work through the acquisition process and post-close integration challenges.
The High Stakes of IT Neglect in M&A
A staggering 70% of M&A deals fail due to a lack of effective integration planning. This statistic underscores the critical role of IT in M&A success. When IT leaders are excluded from early-stage discussions, organizations risk disrupted business operations, data loss, and system downtime. Costs can rise and customer trust erode. And then there are the huge risks of regulatory non-compliance and cybersecurity failures that expose sensitive data or allow hackers access to internal systems.
Increasing the Chances of Success
To help ensure successful technology integration, organizations should consider the following best practices:
- Start early: Integration planning should begin as early as the due diligence phase to allow more time for a comprehensive plan.
- Appoint a dedicated IT team to lead integration efforts: Include members from both the buyer and the target company to develop a comprehensive IT integration plan.
- Consider external integration specialists: Building large internal integration teams can be costly, and external specialists with deep technical expertise in leading complex IT systems integration such as a RED Team CIO, can offer economical scaling and flexibility.
M&A IT Integration Strategy
A Chief Information Officer or Chief Technology Officer will develop a playbook for the IT integration strategy that aims to maximize operational efficiency, minimize disruptions, and meet business goals.
The playbook is a roadmap to IT integration that:
Lays out the objectives of the technology integration: What does the IT team want to achieve with the integration of the tech stacks and information technology processes? Where are the potential cost savings?
Assesses the existing IT systems of the companies involved: This requires a deep dive into everything from the two companies use of tech platforms as basic as Microsoft to finding and eliminating non-standard software to determining how complex regulatory compliance rules affect the merged company. What are the strengths and weaknesses of each company’s information technology systems? What are the differences? Where are the opportunities for consolidation or rationalization? This analysis helps determine where IT infrastructure rationalization is possible and what additional IT services will be needed.
Once the playbook is developed, the CIO will create the timeline for implementing the plan to ensure a smooth transition with minimal IT service disruptions and communicate the plan to all of the stakeholders.
During the post-merger integration, the CIO will be charged with making needed changes to the IT infrastructure, training end users on the new systems and workflows, and constantly monitoring each of those initiatives to ensure the transition is as seamless as possible for employees and customers while maximizing deal value.
A Warning from an Expert
In a wide-ranging webinar discussing why acquisitions fail, Cristina Iaboni, a long-time interim CHRO, told this story about a recent acquisition:
“Our technology folks started to make inquiries about the technology stack that the seller had and how we would untangle everything as they were coming over and how they would fit into the existing systems.
“And sure enough, they reached out to a partner of theirs and this company was the biggest client. Now they knew we were looking at purchasing them, were looking at maybe shutting down all of that. And those folks freaked out, and they went right back to the technology people on the other side who were not aware of what we were doing.
“So get your NDAs in order before you start talking to people. Make sure that those are really tight, because you do not want this information to get out before you’re ready to communicate it in the right way,” she says.