Ram Kumar(MBA,CFA)

3:34 PM, 21st May 2018

M&A Framework for IT

Business transactions, be it mergers, acquisitions, divestitures or joint ventures, are nothing more than actions of business strategies. The ultimate goals of M&A deals vary, but they’re typically intended to: increase stakeholder value through gaining market share; expand into new markets; acquire new products or skillsets; or optimize a component of the value chain. Depending on the size and complexity of these transactions, however, there can be significant disruptions to the overall organization and opportunities to lose focus by the CIO and the broader IT team.

However, CIOs need to be aware that 50%-70% of all M&A transactions fail to create incremental stakeholder value. Although there are many reasons for this low rate of success, failed post-merger integration stands out as a common root cause of the failures

Common pitfalls in the M&A lifecycle:

  • Failure to involve the CIO early enough in M&A planning and execution
  • Inadequately addressing individual and organizational resistance to change
  • Poor or incomplete due dilligence efforts
  • Failure to plan for staff retention
  • Failure to proactively mitigate culture clash within the IT organization and related organizations
  • Not conducting, or ignoring, the risk assessment
  • Not conducting just-in-time IT training before and after systems integration

CIOs involved in M&A transactions need to be equipped to respond to strategic change events by facilitating the potential integration of IT capabilities across firms. To be successful, both structured guidelines and a framework to navigate IT integration complexities are needed

M&A Framework for IT

Clearly there are new trends and innovations that affect the way IT integration is conducted going forward. Cloud computing, for instance, is creating a huge shift in computing technology and more businesses are moving to the cloud to house applications, data, and computing resources as industry sectors converge. The cloud phenomenon and the desire by technology companies to maximize markets are key drivers behind important industry changes.

However, CIOs acknowledge that technology represents only 33% of the activities across an M&A lifecycle. People-centric and process-centric activities outnumber technology-centric activities across the lifecycle of such business transactions.

  This led to the creation of an M&A framework (diagram above) and playbook for IT executives. The framework is designed to help IT executives navigate integration complexities throughout the M&A lifecycle. This is most suited for consolidation, combination, and transformation projects that typically align with the 6 M&A phases (i.e., pre-planning, due diligence, planning, etc).  

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