Five Phases of
M&A Integration
Gartner researchers say in a July 2010 report that the IT
department plays a key role, along with other parts of the
business, in these five phases of M&A integration:
1 The Due Diligence, or Planning, Phase This is when managers quickly gather informa- tion and sketch out a plan of action.
2The Welcome Phase Visible changes are made at this stage. For example, employees are given harmonized email
addresses, phone accounts and security badges, and key
people are moved to new physical locations.
3 The Commercial Phase At this point, the focus is on urgent matters uch as legal and regulatory issues, integrating
financial and management information, and “presenting
one face to the customer.”
4
The Main Integration Phase
This is when most of the big process and system
changes are executed.
5 The Reap-the-Benefits Phase Once the companies are integrated, benefits uch as cost savings or increased market share
are realized and monitored. Managers can also capture lessons for subsequent M&A activities.
A good rule of thumb is that IT will be involved in about
25% of a typical M&A integration project overall, but the
amount of IT department time and e;ort required in each
phase will vary significantly, Gartner says.
perceive IT as a backroom order-taker and don’t even think of
including the CIO.
“Even though we’ve gotten better at getting a seat at the table,
we still fit into that support organization, so we’re brought in
later for M&A activity,” says Christopher Bernard, vice president
of business optimization and CIO at Haig Service Corp. in Green
Brook, N.J. “There are some exceptions when it is a significantly
large transaction, but even then we might not be in as early as
people who are in the business side of the transaction.”
Bernard says his fellow CIOs shouldn’t settle for such a limited
degree of inclusion, considering that the deal’s success — as well
as their own careers — could be on the line.
But the time to build up your M&A capabilities isn’t when
those confidential conversations start. Companies that success-
fully shepherd their IT through M&A deals “get their own IT
house in the best possible shape before initiating any deals,”
according to Sarrazin’s report. “Many have already adopted
advanced, service-oriented architectures that are generally more
flexible and adaptive.”
In the big picture, Sarrazin adds, CIOs need to be totally in
sync with the CEO’s goals for the company — including the op-
portunities generated by mergers and acquisitions — and have a
vision for how IT can help the company meet those goals.
Building the M&A Playbook
The next step is to create an M&A playbook to guide IT — and
the rest of the business — through the process.
Piddington, the CIO who wanted to get more involved in M&A
deals at Global Partners, developed a playbook last year and
made sure other executives knew about it too. Whether it was at
lunch or chatting in the hallway, Piddington says he was selling
company executives on the idea that I T was strengthening its
M&A capabilities for the future.
It’s a smart move, notes George Lawrie, a Forrester Research
analyst who co-wrote a report titled “A CIO’s Guide to Merger
and Acquisition Planning” last year. “The playbook puts you on
the radar of all your other colleagues,” Lawrie says. “It helps your
C-suite to recognize that you’re thinking along the same lines
they are and you’re not just some functionary foreman.”
Whether you call it a playbook, a checklist or a road map, an
M&A plan is an actual tool, not just marketing hype. It helps CIOs
identify what IT issues to address and when, from early-stage
discussions through due diligence and into actual integration.
“We need our own checklist [that asks whether] the company
is in compliance with their license agreements, what’s the level
of their personnel, what is the software they’re using, how is the
department structured, what we can learn from them,” says Greg
Ta;et, CIO of U.S. Gas & Electric in North Miami Beach, Fla.
As with any checklist, the goal is to avoid forgetting something
important. “When you’re on the ground doing due diligence,
there are 100 things being thrown at IT, and unless you have
that workbook to go through, then you’ll come out missing key
points,” says Hank Zupnick, CIO of GE Capital Real Estate, the
commercial real estate division of GE Capital.
Zupnick, who has been involved in a more than a dozen M&A
deals, says having a checklist ensures that he’s ready to start gathering and assessing the right information as soon as his company
starts looking to make an acquisition. “The playbook says, ‘OK,
what am I going to do with this target company I’m buying?’ ”
