May 25, 2022
By Karen Thomas-Bland
As mergers and acquisitions deals become more complex, technology integration becomes critically important. Despite its underpinning role, it’s often an aspect of integration that isn’t prioritised early on, is under-resourced and is an area where costs can quickly spiral out of control.
Disjointed technology integration can negatively affect processes between two businesses, as well as put business objectives and synergy delivery at risk. Technology, in my experience, either makes or breaks the deal – it’s that important. M&A deals are subject to heavy financial scrutiny from shareholders and financial advisers, but good technical due diligence is often an overlooked area.
What Type of Deal Is It?
Before considering the technology integration aspects of a deal, it’s important to consider your overall integration thesis and the degree of transformation that’s needed. I typically think about three scenarios. It’s important early on to determine which situation applies:
Keeping the two businesses separate – a bolt-on acquisition. In this scenario you preserve the individual capabilities of both organisations. From a process and technology perspective, the work is often determining where business models align, if at all, and the key governance points.
Integrate the businesses and find economies of scale. This involves integrating all activities and ensuring the approach is coordinated across geographies, functions, sectors and business units. This needs a detailed organisation design, process mapping and working through the technology integration approach.
Use the integration to redesign the business, considering what activities need to be done, how best to do them and what elements to retain. A redesigned operating model will be needed for this and is often a significant cost while repositioning the business for growth and undertaking a business transformation. This often involves a new process and system design with different hand-off and control points, new capabilities, and different governance models.
After understanding the integration thesis, then it’s time to define the contribution and role of technology in the new business design and operating model; understand the impact of process and technology integration on synergy capture and delivery; and define critical processes and systems and work out the integration approach for each.
Technology systems can vary greatly between two companies, and even within one company in terms of status, usability and age. If a technology deficit exists and isn’t noted, it could result in significant time devoted to modernising and upgrading technologies to unify the IT infrastructure.
Integration Lessons Learned
The lessons I’ve learned from integrating companies over the last 25 years include:
Involving technology leadership in the M&A process is critical to success. Any missteps in merging IT infrastructure can cause unnecessary frustration and add a layer of complexity to an already complex process. A lack of planning, testing, communication and expertise can lead to poor results. Leaders can assess and put in place mechanisms to control costs when tech is included in the conversation from the beginning.
Decide which systems and data to keep and consolidate. Business leaders must make decisions about the systems and data to keep and consolidate and bring the right people to the table when discussing these. For example, creating a …
… data governance plan enables both companies to reduce volumes of old electronic data that are no longer useful or relevant.
Get “day one” right. The first challenge is working toward the first big milestone of “day one” and having a clear blueprint for how you are going to operate that everyone buys into. My best piece of advice is not trying to do everything on the first day. First, focus on what you absolutely need to do to get the basics right and then consider what you could do. For example, can you pay people and suppliers on time, can you bill and receive cash? Getting ‘day one’ right is important in creating momentum and credibility, so it’s not one to get wrong.
Pace the change. It’s also important not to do too much and not to try to run before you can walk. While consolidating IT, it’s imperative to know that speed doesn’t always equate to success. Integration is a complex, gradual process. Too much change too quickly is the most common mistake, particularly involving systems and processes. Pace the change and make sure it’s sequenced appropriately so that it balances the need to achieve synergies with the need to engage people in the new system.
Review and monitor. Once day one is complete, IT teams must govern and monitor the new solutions. Third-party tools and automated solutions can help improve efficiencies, adoption rates and usage. These automated tools can also enforce system policies, which will result in less deviation for access control, licensing and features.
Measure success. Finally, measure success simply and pragmatically. The success of the integration should not be measured on activities completed — for example, “plans done and delivered” or “systems integrated” — but rather on how it has achieved the desired impact on the business and unlocked the opportunities set out in the deal thesis. As such, monitoring the results and supporting the business to ensure the objectives are achieved is an integral part of the process. It’s worth thinking about success in several dimensions, for example, systems migration and consolidation deadlines and ensuring no system outages impact customers, suppliers or employees.
By taking these actions you maximise your chance of technology being a significant source of deal value and competitive advantage.
Karen Thomas-Bland is a board adviser, management consultant and founder of business transformation consultants Seven Transformation. She has experience leading complex, enterprisewide transformations and M&A integrations to $105 billion turnover, with clients including Accenture, EY, WPP, RELX Group and private equity funds. She is an adviser to boards, executive teams and investors and has been a nonexecutive director providing independent oversight and constructive challenge to executive directors on several private equity boards. Before founding Seven, Karen was an executive at IBM, KPMG and several boutique consultancies, based out of New York, Dubai and Sao Paulo. She is a Chartered Organisational Psychologist, Associate Fellow of the British Psychological Society and is an INSEAD-accredited board director. You may follow her on LinkedIn or @KarenThB on Twitter.
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