Due to the current global economic turnaround, mergers, acquisitions and divestments are on the increase. Enterprises are using MA&D to drive growth, reduce costs and acquire assets, such as new capabilities and brands. And despite the popular myth that MA&D destroys value, evidence shows that most deals are positive for all stakeholders. Success, it seems, rests on clarity of goals and a well-thought-through approach to integration.
From a CIO and IS perspective then, preparing for MA&D needs to start long before the deal is announced, and preferably long before it is even a glimmer in the M&A team’s eyes, too.
PLAN THE INTEGRATION
BEFORE THE DEAL IS DONE
The first step is for to work with the senior business team to define and agree on the appropriate role for the CIO and IS in each of the deal’s phases. CIOs who get involved earlier in these types of deals tend to take a more positive integrative viewpoint, rather than an IT functional one. They also bring together information to help the due-diligence team make decisions that are optimized for the deal as a whole, not just for each functional part.
As well as getting yourself and your team on the inside as soon as possible, it is valuable to push for your counterpart (that is, the CIO of the company you are about to acquire) to be included to help identify and think through integration issues and possibilities too. In a typical acquisition, the target CIO would not be brought in until the deal is nearly completed – this is far too late.
A traditional M&A timeline suggests that initial discussions and due diligence are a leisurely period of learning and mutual exploration, and only once the deal is done should the integration be planned and executed. However, the most experienced MA&D CIOs use both the informal discussions and due-diligence phases to evolve an integration plan that gets more detailed over time as information becomes available. That way they hit the ground running.
If you take a moment to analyze some M&A disasters, you will see that problems tend to occur where there is a lot of complexity, business is not as usual, and the decision-making units have significant cognitive biases. Complexity is not just technical, it is organizational too.
To overcome this, the CIO must work fast to reduce this complexity, first by fixing the governance of the IT integration so that broad input from both the acquirer and target’s business and IS groups is included. Next comes clear communication to avoid misunderstandings and alienation of IS staff, and to keep everyone on the same page. And finally, there’s the hard-wiring of the IT integration projects into the portfolio management and prioritizing process, to make sure they happen along side the other things that still need to occur.
FROM TWO TYPES OF DEALS
Two particular types of MA&D deal stand out as great learning opportunities. The first is when you are the acquired rather than the acquiring enterprise. Document and be able to communicate about your processes, human resources and assets. Learn as much as possible about your acquirer’s business strategy, goals and situation. Develop a plan and be ready to discuss it with future management. Keep your staff motivated by helping to resolve uncertainty for them and identify related opportunities
The second learning opportunity is divestment. All of the approaches to acquiring can be applied to a divestment, but in reverse. The most important single element of all this though is again the human one. Computer servers don’t care who they work for, but the people that look after them care deeply.
MA&D deals are on the rise again, driven by globalization and the global economic turnaround. CIOs need to understand and influence their enterprise’s MA&D agenda, create MA&D-ready IS organizations, and build MA&D capabilities into their personal toolkit.