Managing a Merger: Tips for a Successful IT Integration

February 2, 2017

 

Any merger or acquisition is a massive undertaking, requiring detailed analysis of two separate business models, each with their own culture, objectives, and resources. Of all the factors to consider during an M&A event, IT integration should be at the top of the list, though all too often it is a painful afterthought.

 

IT integration tends to be one of the most challenging tasks during a merger, due to today’s dependency on the IT function. In order to manage a successful IT integration that stays within budget, keeps the business running, and aligns with strategic objectives, the IT leaders and business leaders must collaborate closely.

 

A truly collaborative IT integration has the following phases:

 

Internal Review

 

Companies often overlook their own IT scalability. You must have a detailed map of your current infrastructure and capabilities in order to make accurate and reasonable projections. Assess your current IT budget and forecasted spend, the activities IT performs, and the catalog of business services that your customers demand.

 

Performing a similar level of diligence on the other party (and not relying on their own assessment) provides a complete picture of the current business models, which IT and business leaders can then use to determine the impact of specific IT integration strategies on the business. According to the 2014 M&A Integration Survey Report from PricewaterhouseCoopers (PwC), an effective plan requires the evaluation of IT integration opportunities in terms of cost savings, revenue, time commitment, level of effort, and risk avoidance.

 

Planning

 

Planning is the most important part of the process, as all parties involved will expect a quick, seamless transition (irrespective of the IT complexities). Be on the lookout for potential pitfalls that could be detrimental, and communicate any warning signs early and often. If staff from both organizations will be co-located, having them use the same IT systems will help with integration. After all, sitting next to someone who logs into a totally different IT environment does not help anyone feel part of the same organization. Executive teams should be wary of any red flags, as a poorly executed integration can compromise business goals and impact staff morale.

 

If you realize that the integration will be more difficult and/or more expensive than envisaged, revisit your budgets and decide whether or not to proceed. If you have clear data for both parties regarding the IT services provided and their costs, you can quickly highlight duplicated systems, inefficient outsourcing, opportunities for vendor consolidation, and/or overspending on current projects.

 

In order to determine which integration approach is the best fit, you need a thorough understanding of your newly combined company’s current and target business models, according to PwC’s 2014 M&A Integration Report. If your company does not have the necessary IT platforms in place to support both companies once they are combined, you must devise a plan to implement the right architecture.
 

Essentially, your IT integration options are:

 

  1. Absorb one company’s systems into the other company’s infrastructure

  2. Combine both systems to get the best of both worlds

  3. Develop a completely new, standalone system

  4. Leave both sets running – not very efficient!

 

Ongoing Support

 

Once the integration has begun, it is imperative to maintain smooth operations. The majority of this burden falls on IT, as the IT department serves as the foundation for internal and external communication. Specific systems must be fully functional throughout the entire process, including financial reporting tools, human resources applications, and help desk support. These systems help ensure a seamless transition, which is especially important for employees who must onboard with new applications and procedures.

 

The IT department must be ready and able to manage day-to-day business operations while also facilitating the integration. At this stage, the executive team must make several key decisions on their IT investments moving forward. Management will demand consolidated information at the enterprise level to gain insight on business performance. IT leaders must establish and maintain full transparency of their data and comply with all regulatory and documentation requirements throughout the process.

 

With so much at stake during a merger or acquisition, having clear information regarding the IT services provided by both parties, the cost of those services, and the potential “scaling” costs of the environments you wish to retain is crucial. Trying to build all this on the fly in unstructured spreadsheets is difficult, especially with the complexities of “What/If” scenario modeling. If you foresee an M&A event in your company’s future, make sure you have the right tools in place to account for your IT investments.

 

Photo by Rido/Adobe Stock

 

Please reload

Recent Posts
Please reload

Archive
Please reload

 © ClearCost 2018
  • White Twitter Icon
  • White LinkedIn Icon