In December of 2016, I attended an M&A seminar, where most of the attendees were CFOs and other financial executives. Inevitably, the topic of IT integration came up, as part of the overall M&A integration process. I distinctly recall one of the panelists mentioning his IT leader as the “guy wearing the R2-D2” tie. The attendees all chuckled and nodded in agreement with him. While admittedly a bit funny, it was striking how little respect was paid to arguably one of the most critical components of the M&A integration process in the post-acquisition phase. Specifically, IT is the backbone of the integration, and will always be a critical factor in the success or failure of the integration.
Whether your company is on the buy-side or sell-side, here are some examples of the areas where IT is critical to M&A integration project success:
IT is in the business of managing projects; it is central to almost everything we do. However, other departments do not operate with a project-based focus. Simple concepts, such as workstream management, milestone tracking, and using project management tools, will be foreign to many of them. IT should assist the overall project management process, as the IT leaders will almost certainly be some of the most experienced project leaders within the company. Of course, there will be some exceptions, but IT runs projects for a living. Other departments simply don’t operate the same way. As a result, IT can be leveraged to assist with the overall project management for the integration.
Data is central to every one of the M&A integration work streams. Without quality data, finance cannot run reports, operations can’t manage assets, HR cannot process payroll, etc. Essentially, the organization is blind without good data. In order to ensure quality data integration, data centers need to be managed, the conversion process must be designed and executed, data must be reviewed, reconciled and reported, and the entire process needs to be auditable. We could spend days on this topic alone, given its importance. Needless to say, data management throughout the integration is of paramount importance.
IT Infrastructure and Asset Management
IT assets will need to be transferred, and in the era of cloud data centers, this may require coordination with your hosting provider, greatly complicating the process. In addition, not only will you need to contend with the hosting provider, the acquiring company may have a different strategy as it relates to cloud infrastructure. Companies that are 100% in the cloud may be acquired by companies that have a hybrid approach, or vice versa. Just determining which components will be transferred to an “on-premise” data center will be challenging, let alone actually executing the transfer while keeping the applications operating.
IT Application Separation and Carve-Out
Another key technical area is the application separation and carve-out. During the integration, not only will the hardware need to be migrated, but the applications running on that hardware will need to be assessed for migration as well. Some applications may require carve out, some may be transferred completely, and others may be eliminated. Planning and then executing this migration, concurrent with a hardware transition, will be one of the most important and technically demanding pieces of the entire integration. And, just like everything else in IT during the integration, the application separation and carve-out will need to be done while keeping the application portfolio operating normally, to keep the company running full speed.
IT projects create change, and change creates challenges. IT leaders typically have years of experience in handling the conflict and issues that arise when introducing new processes and tools. This is exactly the skill set required to help overcome integration obstacles when they are presented by individuals in the company who are not “bought-in” to the new structure. People generally do not like change, but in the IT world, we not only manage the constant change of technology, but also the emotional impact on people who are being forced to adopt a new platform or process. In fact, overcoming change resistance is a core component of IT project management, and can be utilized to great effect in an M&A integration.
Communication during an M&A transaction is uniquely challenging. Integration leaders need to constantly assess whether specific facets of information can be communicated, or should be communicated, while actively monitoring the impact of that communication on the employees. This is even more critical in an M&A transaction because employees quickly recognize their jobs may be in jeopardy. This puts additional emphasis on communication throughout the process, to ensure the right facts are communicated to present the right perception. It is very easy to lose the trust of the organization through poor or ineffective communication; getting that trust back quickly is nearly impossible. In short, you need to get it right from the very beginning, or you risk losing credibility and damaging morale in the organization.
IT leaders have a lot of experience in partner selection, and choosing your integration partner is absolutely critical. There are many firms in this space, full of newly-minted MBAs who have limited real experience in handling the complexities of IT integration. Your focus in selecting a partner should be on finding a team that has actually done this type of work before, preferably multiple times, in your industry. Ask your partner where they have done this before, and then follow up to confirm it. Having the right partner can make or break the whole process, so choose wisely.
While this article only scratches the surface, it should be clear that integration leaders need to carefully consider the IT needs during an M&A integration, or face significant problems during the project. Namely, IT is the backbone of the M&A integration process. Without managing the critical processes highlighted above, the integration will bog down, and may completely fail. Ignoring or downplaying the role of IT creates enormous risk, and M&A leaders should prioritize IT as a central component of integration planning, and staff the team accordingly. Finally, choose your integration partner carefully, with a focus on choosing a team that has truly done it before. If you consider and implement these concepts, you will greatly increase your odds of success. And for the record, it’s a Skywalker tie. Only a geek would wear an R2-D2 tie.