Why excluding IT in M&A planning is a recipe for failure

More than 60% of acquisitions fail to meet their goals within the planned timeframe

More than 60% of acquisitions fail to meet their goals within the planned timeframe, and when CIOs and other IT leaders are not involved in the planning, there tend to be surprises of the bad kind.

That is according to Deloitte’s study, Solving the Merger Mystery: Maximizing the Payoff of Mergers and Acquisitions, and it is a fact that remains a top concern during the M&A planning process.

Whether it’s Burger King and Tim Horton’s or AT&T and DirecTV, we live in a business culture that hinges on mergers and acquisitions, with hundreds of millions or billions of dollars at stake.

Again and again, however, CIOs and other IT leaders are not part of the due diligence team preparing and planning for the deal. During the fast-paced execution process, priorities such as operations integration and even the risk of losing critical operational knowledge along with human capital can be seen as an afterthought.

Vital systems taken for granted

The IT team is responsible for the complex, labour-intensive task of enterprise-wide systems integration, so basic business enablers such as phones, voicemail and email don’t experience glitches. Slip-ups can cause monumental headaches for employees, and even customers. 

Preparing to merge two entirely different IT organisations is not a task that should be left until the 11th hour.

IT Q&A that could affect purchase price

Who knows all of the organisation’s enterprise applications, when licences will expire and what the maintenance fees are? Does the due diligence team know how old the other company’s datacentres are, and how urgently a significant investment must be made? What about the enterprise’s hundreds or thousands of laptop computers, and when millions of dollars must be spent on upgrades?

A CIO is best prepared to answer these questions if asked to participate in an acquisition planning process from its inception. The insights gleaned from a deep dive into the IT organisation of the potential acquisition can add up to hundreds of millions of dollars, and may even affect the final purchase price.

Determining more nimble, agile IT culture

Choosing which IT culture and systems should prevail should be a proactive, business-driven decision rather than defaulting to that of the larger or acquiring company. Sometimes the smaller company has more nimble, agile systems and processes that can be leveraged to increase the operating efficiency and value of the combined entity.

Size doesn’t matter

Just because a company is small doesn’t necessarily make the IT transition during an M&A process easier. The C-suite of a $5bn enterprise may look at acquiring a $100m company and see it as a non-event, but the CIO knows differently.

Invite the CIO to the table early

Putting technology risks and requirements in a language that other C-suite leaders can understand is up to the CIO. IT leaders seeking common ground with business executives is nothing new. Alignment of IT with the business has been one of the top three concerns of IT managers for the last 11 years, according to the Society for Information Management’s annual study. During a merger or acquisition, it can be worth millions.


Fred Latala is VP of datacentre solutions at Forsythe Technology

This was last published in November 2014

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