There’s probably not an IT professional around who has been through a merger or acquisition, who didn’t wish he had some sort of map to guide him through those murky, treacherous, potentially career-threatening waters. Finally, a former IT executive who has successfully navigated himself through those swirling currents has done something to help keep his peers’ corporate ships from sinking: He drew a map.
That former IT executive is Alpharetta, Ga.-based CIO-turned-author Dewey Ray, and the map is “The IT Professional’s Merger and Acquisition Handbook.” According to Ray, it’s essential for any company in an M&A scenario to have IT integrally involved in charting the course early on. “Too often what happens is the deal gets done, and the senior IT person isn’t even involved until the deal is consummated,” Ray says. “It’s sort of thrown over the fence to him or her to make it happen. It’s a huge problem.”
I spoke with Ray about all this, and I asked him how he would characterize the role that IT plays in the success or failure of a merger or acquisition. He explained that a successful M&A scenario is all about synergies, and the realization of those synergies is all about IT:
Typically today in a deal, the dealmakers look for, identify and talk about synergies once the deal is consummated. When you look under the covers at those synergies, what you typically find is IT is needed to enable those synergies, and sometimes IT is the only enabler. So it’s very important for IT to be in the middle of the mix as the deal is being done, because if the synergies aren’t realized, oftentimes the deal will be considered a failure. Even if the IT piece is done OK, if it’s not done really, really well, the synergies aren’t realized, and it can cast a long, dark shadow. When WorldCom was gobbling up telephone companies around the country, they failed to integrate those companies. As an example, if a sales rep was out making a call on a customer of one of the WorldCom firms, and another sales rep was representing another company that had been acquired by WorldCom, typically they had different IT systems they were working with, and the customer was perplexed. They said, “Wait a minute, you’re WorldCom—why don’t you have all of this stuff integrated?”
I asked Ray how common it is for IT to “be in the middle of the mix.” He said that unfortunately, IT often doesn’t even get to play:
They aren’t invited to the table. Our research indicates that that’s one of the core problems. In the book, I talk about how important it is for the senior IT person to ask for and secure a seat at the planning table so they hear from the very beginning, as discussions are taking place, about a potential acquisition or merger. They begin to understand what the drivers of the proposed merger or acquisition are, so as the deal evolves, they’re better equipped to prepare the approach that they need to take to do IT due diligence.
Ray went on to explain that in a lot of companies today, IT is the business:
For a lot of firms, you rip out the technology piece, and you don’t have much of a business model. If companies today aren’t tuned in to the digital revolution, if they haven’t embraced that, and that’s not a core part of what they’re about, there’s a risk there for the acquiring company. So from the IT perspective of the acquiring firm, the IT folks need to be plugged in, they need to be given the opportunity to assess how well that firm is digitally ready for what’s coming, and how responsive it is to change, and how well it uses IT to integrate its supply chain and the associated value chain. Today every business has a value chain, and IT is essentially what enables that.
I asked Ray to identify the single most important key to the success of a merger or acquisition from an IT standpoint. He said it’s understanding the drivers behind the deal:
It’s making sure that the post-transaction integration plan reflects those M&A business drivers. And in the process, avoiding the overreach that sometimes happens in these situations — being able to precisely map those M&A business drivers to the IT capabilities that are going to be needed to fulfill those business objectives.
Ray also talked about the route he took from CIO to becoming an author and launching an M&A consulting- and training-services startup. It’s a fascinating journey that I’ll cover in a later post.