Three Tips for IT Success During M&As

Loraine Lawson

IT's ability to handle back-end integration during mergers and acquisitions can be critical to the success of these deals; it can also be key to whether the CIO is seen as a stumbling block or a savvy business leader who identifies acquisition opportunities, according to a recent McKinsey Quarterly article.


That may not exactly surprise you-in fact, it's something of a reoccurring topic on IT Business Edge.


But this article actually provides a lot of insight about how you shift from the fall guy for bad M&As to a key player in successful acquisitions.


The report lists three key back-end integration issues typically addressed by IT departments in companies with successful merger and acquisition records:


  1. Get your own IT house in shape right now-preferably before there are any M&A plans on the horizon. What does this mean? The writers-Hugo Sarrazin, director at McKinsey's Silicon Valley office, and Andy West, a Boston-based McKinsey principal-say it means having "advanced service-oriented architectures (SOA) that are generally more flexible and adaptive, as well as designed to provide a platform that accommodates a wide range of business applications," and reducing the number of systems you have in your own infrastructure. This is so critical, the writers warn, against trying an M&A without back-end integration. "CEOs and CFOs should be wary of embarking on an M&A growth strategy that will require a lot of back-end integration if their corporate IT architectures are still fragmented: the risk of failure is too high," the report says.
  2. Be involved during the due-diligence phase. This is key, since many of the financial forecasts about mergers will actually hinge on IT's ability to integrate the two companies' systems-not just in IT, but in areas where IT has a heavy hand, including CRM, HR and finance.
  3. Create a post-merger integration strategy that clarifies what role IT will play and what resources you'll have available. More than one M&A success has been thwarted because IT didn't know about or have the resources to deliver the integration by the expected timeline.


The article includes a slew of other valuable tips and information-including why Day 100 is so critical and how CIOs can become a key player in identifying potential acquisition targets as their M&A skills improve. For instance, the article notes that in companies with a flexible, streamline approached to IT, it's easier to ascertain which deals are a good beat and which are not. The article states:

Conceivably, acquirers might even be able to bid higher, since they are better prepared to capture the 10 to 15 percent cost savings that successful IT integrations deliver.

As an added bonus, the article is available to read for free with registration-but McKinsey sometimes locks content, so you might want to check it out sooner rather than later.

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