Use Your Information Technology Department to Improve Merger and Acquisition Results!

When your company did it’s most recent acquisition, or when it was acquired by another company, what role did your Chief Information Officer play? Chances are, your CIO could have contributed more to the company’s success. It’s no secret that mergers and acquisitions (MA First, get your IT experts involved in systems evaluation during due diligence phase of the transaction. Specifically, get them to focus on these elements of the acquisition target:

Nature of Systems – what they do, whether they are internally developed or commercial-off-the-shelf (COTS) packages, and how effective they are. Ineffective systems cost a fortune in terms of efficiency, and load and additional burden on the company in license fees, and / or maintenance costs.

Functionality / Capability – Is what they do available in your existing systems platform? Is the functionality of these systems so unique and important that they would have to be retained and supported following the acquisition? Is it additional capability that would be of value to the rest of your company following the acquisition?

Scalability – Assuming that the capability of a system is important; can it grow enough to support the user base of your entire company without substantial upgrades and rework?
Migration Path – Is the system supported by an outside company that will keep it current with the latest technology and business practices?

Compatibility – Will the systems of the company being acquired work well with the balance of the systems in the acquiring company? Will they run on your existing hardware? If they were internally developed, are they written in a language that your IT organization can support?
Strategic Fit – Do the systems required to operate the acquisition target fit well with the overall IT strategy of your company? For example, if your company has decided to move to a few tightly integrated commercial software application sets, acquiring a company that requires extensive internally developed systems is a poor choice.

Second, push for adequate detail to understand the real costs involved. Your IT experts can help you determine whether basic data elements such as part numbers and units of measure mean the same thing. When they don’t, a substantial amount of work can be needed to achieve commonality. That commonality is the thing that enables asset leveraging actions such as larger purchase volumes and shared services. Some companies are satisfied with saying “we have a master schedule and they have a master schedule, so we’re a match there”. They aren’t digging deep enough.

If one company schedules order start dates and the other schedules completion dates, a lot of things can drive them out of synch. Especially when one company will be a feeder to another, that level of synchronization is important. In companies like telecom companies, coordinating things like carrier service agreements and inventory redeployment also require some detailed review and coordination. Depending on what lies in the details, a lot of money can be captured – or lost. Require an IT plan and estimate. Be sure your company’s information technology leader knows that his or her career will be impacted – for good or ill – by the quality of that plan. Next year’s IT budget will be a function of what is contained in that plan along with normal expenses. That way, the people performing the estimate will be motivated to make sure it’s thorough. Fourth, look for a succinct listing of the major systems that will be mothballed, what will replace them, and what kind of effort will be required to make that transition happen.

Then look at timing to see whether it lines up with the projected business case for the acquisition. Will it break even in time? Finally, look at whether your company has the skills needed to perform the transition work. If not, will you be able to hire people and bring them up to speed quickly enough, or do you plan to bring in outside experts? Make sure the associated costs are in your business case. Fifth and finally, look for low-hanging fruit. Will the new IT capabilities acquired as a part of the new business provide new efficiencies? Are there opportunities to migrate the balance of your company’s systems to a newly acquired platform that is more efficient? Does the combination of the old and the new technology (or data) provide management with new insight, new competitive intelligence, or new service offerings? What level of effort and investment would be required to make those opportunities into reality? Again, request any cost and benefit data that is pertinent to the acquisition’s business case.