"The integration programme is on track. It is only IT that is behind." A comment along these lines usually occurs within a month of a business undergoing a merger, if not sooner. In the worst cases, IT delays can bring the whole integration programme between two companies to a halt. In all cases, a black mark goes down against the IT team.
So what should organisations contemplating a merger or acquisition be thinking about when it comes to IT?
Once a target has been selected and the transaction moves into top gear, teams of lawyers, accountants and industry specialists support the "due diligence" process. With a focus on the statutory and regulatory aspects of the deal, the financial and tax structuring and the synergy benefits, integration concerns are often way down the list of priorities.
The IT component still remains someway down the list of priorities. Greater emphasis is always placed on people, customers, products and financials.
IT due diligence is all too often just a listing of systems and software with little thought given to how they will be assessed and integrated. Only an enlightened few bring their IT director into the inner sanctum of the transaction team.
Usually, in the run up to day one, the acquirer's focus is on the establishment of operational and financial controls, as well as the communications that are needed for different stakeholders. In hostile deals, contact between both sides may be restricted; in friendlier takeovers, greater collaboration may take place.
Day one generally arrives with the IT teams of the two merging businesses having had limited contact with each other. However, IT is expected to carry the burden of seamless integration between the two companies.
Immediately, requests will start to flood in from the rest of the business, such as getting access to the IT systems and network of the other company. Common demands will include:
- "Can we get access to their systems this week?"
- "Can I access my e-mail on their network?"
- "How long before we can get this onto our server?"
To complicate things further, these requests come before all the major questions of the IT team's structure, location, capacity and platforms have been resolved. In the meantime, other parts of the business are busy building their integration plans in blissful ignorance of their dependencies on IT. Whether they are realistic and agreed by all sides is subservient to the need to have plans quickly.
In a matter of weeks, the IT workload has mushroomed, increasing the probability of disappointment on all fronts. Everyone will realise that IT has not been involved and will need further time to get its plans together, slowing the pace and causing frustration all round.
Fortunately, IT managers can take steps to minimise the risk of ending up in such a situation. The trick is to plan ahead and ensure that IT is at the heart of any merger, not left on the sidelines.
How to relieve the burden on IT
- Involve the IT director in the merger process
- Open a dialogue with the IT department of the company being acquired as soon as possible
- Anticipate initial connectivity and integration problems
- Ensure security measures can cope with the increased size and risk-profile of the new organisation
- Identity and retain staff vital to maintain business-critical systems
- Ensure other departments have realistic assumptions of IT's ability to deliver on time and on budget
- Ensure IT has a strong presence at steering group meetings
- Balance "quick win" projects with larger strategic benefits
- Capitalise on synergies created by the merger, ie reduced expenditure on licences, support and consulting.
Neil Boss and Glen Witney are directors in the merger integration team at Deloitte