Computer Weekly reported recently thatmerger and acquisition activityislikely to continuedespite - or
perhaps because of - the credit crunch, writes Marc Bray,
operations director at Totalamber.
We at Totalamber share that view. We also see businesses being
insufficiently diligent with the IT side of due diligence in their
hunger to acquire other companies' customers and order books.
Businesses run the risk of overlooking the processes and operations
that will
enable the newly-formed business to hit the ground running.
It is alarming companies assume the IT system of the company
they are buying will be adequate simply because the company has
been running it for some time, without considering its
impact on their current systems and processes or its suitability
for the future of the business. Conversely, the systems in use
at the company being acquired may be better suited than the ones of
the company expressing the interest.
IT directors and consultants would benefit from taking a
holistic view of the two systems, evaluating whether there are
likely to be integration problems, not only in terms of operating
two systems but also
sharing data held on each system. Taking this view could raise
or lower the cost of the acquisition and avoid pitfalls.
Involving IT teams and consultants, not only finance and
operations teams such as HR at the outset of a due diligence
exercise, rather than expecting them to sort out inherited problems
once the deal is done, reduces the upheaval that can accompany an
acquisition.
Separate systems, such as
human resources and
payroll, may come with
separate maintenance contracts, licences, and incompatible
data, leading to
duplication of cost and effort and the late delivery of
information. If information is delayed, it becomes less useful,
reducing the newly-formed company's ability to compete. Adopting a
single datapoint reduces error.
If a company knows what it is facing, it can take a forewarned
approach. It needs to empower its IT teams and consultants to take
the same approach as a homebuyer, offsetting the costs of upgrades
or replacements against the cost of the acquisition.
A merger plan should look at IT systems and data integration and
associated costs as much as looking at a Transfer of Undertakings,
rebranding and other aspects of a merger.
Another factor for consideration is that a merger and
acquisition situation presents IT teams and consultants not only
with the opportunity to review and choose between the existing
systems, but also to identify the key attributes they need in the
new company's key enterprise systems (HR & Payroll, ERP,
Business Intelligence/Analytics) if they decide to replace. A
structured approach to evaluating potential suppliers of systems
and services to the new company is vital in this situation.
Valuable lessons can be learned from the public sector's
programmes for fair assessment and evaluation, working with IT
consultants to develop a scorecard for comparing potential
suppliers and holding tendering and pitching processes to ensure a
fair price. The return on investment of conducting such a process
would be realised in terms of smooth transitions and process
improvements throughout the business.
Totalamber is working with a number of acquisitive companies.
Different strategies for incorporating IT from acquired or merged
companies are being developed. One example is for an acquisitive
company to develop a standard template or configuration, mandates
that an acquired company takes this on, implements the new software
and migrates existing data into this new system.
This is a hard-hitting approach but ensures acquired
organisations are up and running and providing effective services
into the group as quickly as possible. This approach reduces
support and maintenance costs and also ensures consolidated
management information is available across the group.
It is a truism that IT is key to running a business. Effective
due diligence around IT systems is a growing trend because it gives
companies a standard model to roll out in further acquisitions,
reducing administration time and costs and streamlining business
continuity.
Totalamber
Ltd provides software consultancy services for the design,
implementation, support and maintenance of key enterprise
applications.