mergers & acquisitions it implications

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Expansion into new markets

Build revenue and market position

Acquire expertise

Create synergies and efficiencies:Shared overhead – cost reduction

Economies of scale

Sharing data (e.g., clients, markets) across the organizations


Estimate that between 50% - 70% of M&As fail

Reasons for failure:Cultural differences

Lack of transition planning

Difficulties integrating IT between organizations

Unexpected problems and complications

Up to 50% of integration costs can be incurred by IT


* From “The Role of Information Technology in Mergers and Acquisitions”, by Peter Blatman, et al. Deloitte Consulting

• Picking the right model for integrationStrategy

• Getting the right information early in the processDue Diligence

• Effectively implementing the merger / acquisition, including anticipation of costs

• Picking the right teamExecution

• Aligning systems and processesPost Merger Integration


Successful strategies include:Early involvement of IT

Careful due diligence early in process – need to assess IT landscape of both companies to identify land mines

Careful attention to budget – it is almost always more complicated and costly than anticipated

Too often, early planning:Focuses on front-office (product management, sales, marketing) and

Neglects back-office functions (HR, IT, operations)


Goals:

• Expertise of seller

• Access to newer markets

Maintain

Strategy: Keep status quo

operations for both companies

Goals:

• Access to newer markets

• Access to newer distribution channels

Synthesize

Strategy: Choose best

technologies & processes from

each company

Goals:

• Cost reduction

• Market expansion

Consolidate

Strategy: Adopt technology &

processes of acquiring company

Goals:

• New business vision &

processes

Transform

Strategy: Develop a new IT vision

and organize as per vision


Establish single procurement

function

Consolidate hardware,

software, storage

Sales and marketing

Production

Supplier management

systems

Cost reduction by eliminating

duplicate IT functions

Standardize operations (e.g.,

IT support, maintenance)

Shared Overhead

Integrate customer data,

discover new revenue sources

Streamline work-flow

Cost reduction

Market expansion

New markets

Systems Integration

Economies of Scale

M&A SuccessExchange of information


Incompatible information systems and data repositories

Divergent management philosophies

Incongruent management practices

IT systems that are not compatible and require large investments of time and $$$ to merge

Difficult decisions to be made:Staff retention (or not)

Legacy applications / systems – keep or not?


Lost revenue through poor execution

Need to “keep the lights on” – conduct business as usual, while moving forward with transition

Potential customer service issues with poorly executed transitions

Data migration and security issues

Adequate time for testing and QA activities under pressure from business to make merger deadlines


Management of existing contracts – potentially a huge project (multi-year)

Software / hardware license and lease contracts

Telecommunications

Outsourced services

All contracts must be reviewed for:Term (how much time left)

Termination clauses and penalties

Determination whether to continue or terminate, or modify terms


IT system integration is a mature discipline –most large IT organizations are experienced with integration projects

IT in M&A projects:Require the same project / transition management disciplines on a larger scale

Are frequently rushed and lack adequate planning

Have an added complexity of cultural differences between the companies


Need clear statement from senior leadership about how business will deliver value through IT

Set goals and priorities – can’t do everything at once – what is the vision?

Create roadmap of enterprise architecture and plan for achieving end state

Communications planning

Shared services – what can be shared? HR/finance/ERP/support?

2010 AvaSea Services – All Rights Reserved

Set / review strategy

Create / update integration strategy

detailed plan

Perform due diligence

Execute communications

plan

Set measureable targets & goals

• Involve IT early

• Identify objectives for M&A

• What are expected benefits?

How achieved?

• Form integration team

• Create & socialize white

papers on strategy

• Create communications plan

• Create PMO

• Honest appraisal

• Identify possible land mines

• Document & report issues,

rework strategy

• Identify stakeholders

• Plan for all levels of organization

• Document & report issues, rework

plan

• What are measures of success?

• How measured?

• What happens if not met?


Staffing implications – critical to successCommunication planning

Cultural considerations

Training

Retention of key technical talent critical to success


Privacy and securityRegulatory requirements might be different in different companies – particularly important for health and financial services

Paramount importance to protect corporate data

Data types may be incompatible between companies, requiring careful planning for merging

Regulations include:Markets in Financial Instruments (MiFID)

Sarbanes-Oxley (SOX)

Payment Card Industry Data Security Standard (PCI DSS) –related to retail


CIO (IT) involvement early in merger planning activities

Priority on thorough and detailed transition planning: requires project management and technical expertise

Communications planning

Early due diligence to identify majority of pitfalls – ideally done prior to signing M&A agreement


Merge systems? Migrate to one or the other?

How compatible are the business processes that support and use the systems?

What is role of outsourcing (or consultants) in:Current operations of each company

Transition / project management

Future operations?

Outsourcing contracts may have large impact on M&A plans


What are your metrics for success?

How will you know if you have achieved your vision? Examples of metrics:

System cutovers without downtime

Customer satisfaction measures

Quality of data in combined systems, protection of data security

System uptimes

Business processes continuing without interruption


StrategyDue

DiligenceIntegration

PlanningExecution

Define

integration

and IT

strategies

Set targets &

measures

Create

integration team

Assess risks &

synergies

Estimate costs

Establish project

management

office (PMO)

Choose

approach

Develop work

plans and

metrics

Implement

work plans

Check against

metrics


SAS Acquires IDeaS

SAS Institute: Leading data analytics co. ~2B$Acquired IDeaS (MN) in 3Q 2008 co. ~ 20M$+

Expand current product offerings by using decision systems technology from seller

Maintained existing product lines while exploring synergies


Oracle and Symantec

Oracle : 27 acquisitions since Dec. 2006Penetrating new markets, innovating through synthesis of new products and services

Including Stellent Inc. from Minnesota

Ran into issues (e.g., PeopleSoft acquisition)

Symantec Inc.: 40+ acquisitions since Jan. 2001Complementary products to expand the market for information security

Includes Altiris and PC tools for IT management


Google

Google : 63 acquisitions since 2001Expanding technology reach both online & mobile

Includes Android – popular in Smart Phones market

Includes Double Click – used in Ad Sense


Mergers and Acquisitions: The Business Risks Associated with Merging IT. Mark Bargh, VP of AppLabs, 2007.

Plugging IT into the Merger Equation. InfoWorld, April 24, 2000.

Information Technology’s M&A Problem: A Briefing on Integration during Mergers & Acquisitions. Shawn Torkelson, Synapse SE. [email protected].

The Role of Information Technology in Mergers and Acquisitions. Peter Blatman, Principal, et al. Deloitte Consulting LLP. 2008, Deloitte Development LLC.

How to Manage Mergers and Acquisitions. Stephanie Davidson, IT World-An Open Exchange. April 5, 2001.

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mergers & acquisitions it implications

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