The Game Changer in M&A - IT Integration

Updated: Feb 7, 2019

Merger, Integration, M&A, Savings, Compliance
Importance of IT in M&A

IT plays a game-changing role in a successful integration. IT is pervasive and runs across all departments of finance, marketing, operations and HR, and leverages technologies and innovations to help towards organizational growth. Therefore, a close collaboration and communication with a proper governance structure between IT, business units and the top leadership is required for successful IT integration during and after the merger.

This could be achieved by formulating a list of IT objectives prioritized based on risk, potential savings and available IT resources for all business lines.

The CIO is responsible for balancing 3 competing priorities during M&A:

  1. Running the business as usual and avoid any disruption during the merger process, which entails technological risk inherent in large-scale change in systems

  2. Working towards finding cost savings and other synergies by combining the enterprise systems, software, hardware, networking equipment and IT staffing of the two organizations

  3. Provide IT support to integrate business units and corporate functions like HR, finance, marketing, operations along with any rationalization of product lines and/or services in those functions

  4. IT support for customer retention and acquisition, and entry or expan­sion into new markets, wherein the potential synergy and savings are often higher than the IT unit by itself

The IT deployment during the merger can be prioritized based on factors like:

  1. Business impact, including regulatory compliance and risk

  2. Ease of implementation

  3. Interdependency of certain projects, possible rationalization of services & product

  4. Resource demands in terms of personnel and hardware

  5. Potential cost savings and revenue growth

The IT integration depends on the long-term goals and structure of the merged entity including:

  1. Maintaining separate IT environments - the buyer operates like a holding company and plans to sell or spin off acquired business or assets in a relatively shorter time.

  2. Adopting IT environment of one company - the buyer is large, established and centrally managed and plans to fully incorporate the acquired business for the long term. The contractual obligations make one party’s environment more attractive and cost-effective than the other’s.

  3. Leveraging the best practices of both to form a new one - the deal represents a “merger of equals” and the acquired business adds new products or services that demand specific IT requirements

(Source: Alvarez Marshall: The 3 options for IT environments.)

There are at least a few aspects of the IT environment that must be considered upon integration. For example:

  1. Integration of communication platforms (i.e. email, phone, intranet); Data sources for consolidated financial reporting.

  2. Implementation of common data standards to enable data migration requirements; Decommissioning of unused applications, systems and networks.

  3. Comparative assessment and selection of critical business application platforms to help future infrastructure .

There is a lot of synergy and savings hidden during the integration of the IT infrastructure of the two organizations including IT vendor contracts that call for rationalization and aggregation for enhanced compliance and cost savings. Hence, before creating post acquisition integration plans, understanding the organizations' IT environments is very important.

Proacure, through its Spend Hypercube helps in analyzing IT hardware, software, networking and staffing contracts of both the organizations to find opportunities of spend consolidation, supplier aggregation, demand management, value engineering and compliance. We provide an analytics dashboard with visualization of spend and opportunity assessment across vendors and business units for a particular IT subcategory to help in optimization and savings.

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The Proacure Team

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