Computerworld - May 23, 2011

Given that analysts are predicting an uptick in M&A activity this year, CIOs would be wise to be prepared. The age-old complaint is that IT is often sidelined during the early discussions and brought in only after the deal has been signed, in order to integrate the systems. That means companies don’t find out about serious system incompatibilities until it’s too late. Or they lose out on the cost-saving and revenue-generating benefits that motivated the deal in the first place.

While M&A deals don’t usually begin with technology as the raison d’être, they can end badly because of poor IT planning.

“When you look at synergies — why you do a deal and what drives a deal — it’s not IT-focused. It’s savings, better market share, access to new markets. Yet IT seems to be cited as a key failure point to making any of those things work,” says Jeff Shaffer, leader of the IT advisory practice at consulting firm Crowe Horwath in Chicago.

IT’s role in mergers and acquisitions, he explains, goes well beyond making sure systems actually run when the companies come together — although that aspect can’t be ignored. Shaffer says IT needs to do the following:

n Assess the strengths and weaknesses of both parties’ I T infra-
structures, how best to integrate them, and how much will it cost.
n Deliver the systems that enable the head-count reductions,
process efficiencies or cross-selling synergies that the merger is
meant to deliver — and do it on the timeline executives set.
n Look for opportunities to improve IT, from deploying more
efficient systems to negotiating better terms with vendors.

I’ve gone from not being
included to having [a role]
fairly early in the deal.

KEN PIDDINGTON, CIO, GlObal Partners

Piddington says he has demonstrated how delving deeper into I T issues before the deal is done brings value back to his company. He has, for example, been able to lower costs by renegotiating deals with vendors earlier on rather than paying a premium for a last-minute purchase. And in another case, he showed his colleagues how their initial estimated costs for I T integration were off by $5 million — a difference that helped the company decide that the deal wasn’t worth doing.

IT’s Shortcomings

Analysts estimate that more than half of all mergers and acquisitions fail to achieve their business objectives, and while they say it’s not fair to lay all the blame at IT’s door, IT does play a part in those failures.

McKinsey & Co., in its January
2011 report “Understanding the
Strategic Value of IT in M&A,” found
that “50 to 60 percent of the initia-
tives intended to capture synergies
are strongly related to I T, but most IT
issues are not fully addressed during
due diligence or the early stages of
post-merger planning.”
Often the IT organization isn’t involved or isn’t “forceful
enough to articulate the [business-IT] dependencies that have to
exist to achieve full value,” according to report co-author Hugo
Sarrazin, a senior partner at McKinsey.

Will You Stay
Or Will You Go?

ABIG QUESTION facing any CIO going through a merger is whether he or she will still have a job when the deal is done. Granted, the CIO at the company that’s doing the buying usually has an edge, but even then there’s no assurance of job security, consultants say. the best way to secure your professional future is to be well prepared, says Jeff shaffer, leader of the It advisory practice at Crowe Hor wath. “the CIO who is prepared for the M&a helps prepare for his or her own success,

because if you’re invaluable to the integration, you’re at the very least guaranteed to have a role through the integration process,” he says.

Ken Piddington, CIO at Global Partners, says CIOs improve their chances of staying on post-merger — even if they’re from the acquired company — if they’ve built a standout It organization with the kind of talented leaders and staffers that any company would want to keep on.

“If you’ve done a great job and built world-class It, you’ve positioned yourself to be the It department of choice,” he says.

but even if you’re not retained as the post-merger CIO, how you handle yourself during the transition can be critical to your future, Piddington says. “You’ve got to be a team player. You just don’t burn bridges,” he says. “this is a small field, and you might end up working for the same people down the road.”