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
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.
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
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.”
— Mar Y K. Pratt