IT teams have been at the heart of post M&A integration projects for decades but, as digitization becomes so important and now often the reason behind many deals, it’s more important than ever to get the IT integration plan right.
Although 2015 was a record year for M&A activity, the heat is now starting to flow out of the market a little. But that still means that a lot of deals done over the past 12 months or so now need to be integrated into the new parent firm or the company on the other side of a merger.
And this means that corporate IT teams are set for a busy year. While those behind an M&A deal have used Corporate IT as a prime source of the projected savings and synergies for many years now, as digitization becomes such an important corporate priority, and managers use M&A more and more to acquire the digital products, channels, or expertise they need, IT’s role will only grow.
The Five Steps
Integrating the IT teams and assets of two companies is a resource-intensive and complex effort, which can lead to anxious times for the IT staff on both sides.
IT leadership teams should take a series of steps that address all aspects of the integration project: strategy, technology, and people. They also need to be thoughtful in how they support the business objectives of the deal, and avoid pitfalls that can derail integration.
- Determine integration priorities: Without a clear understanding of the deal’s strategic objectives, IT integration plans may over or under-invest in the activities that are most critical to generating those elusive “synergies” (i.e., all the benefits that the dealmaking team predict the deal would confer).IT integration plans should use the corporate objectives of the deal to inform prioritization and sequencing of the IT activities. For example, if the two companies serve the same customer base, integrating CRM data will be a priority to generate cross-sell opportunities; if both companies run the same suite of HR systems, integrating these might be a source of quick wins.
- Assess the impact on the IT team and develop a communication plan: The uncertainty around integration plans can harm employee morale and productivity.The IT leadership team should work with their HR teams to identify different segments of employees, and develop targeted communication plans to alleviate concerns. This assessment should identify tools, beyond communication, to address retention risks.
- Set up an integration team and governance structure: IT integration is typically the one of the biggest and most complex tasks of combining two companies. Without careful orchestration of all IT activities, the company-level integration plan may be at risk of not meeting the objectives and timelines.Set up an integration team led by a senior IT leader who is responsible for coordinating all IT activities in both the companies, and serving as a liaison to the corporate integration teams. For larger deals, a core IT integration team can manage the integration program, while a larger extended team can become involved as needed.
- Start early on collecting the necessary data for integration: Integration plans will fail to include and appropriately sequence all the activities without access to basic information such as major vendors and locations. Get an early start on gathering relevant data from both companies to inform integration plans and costs.Information on major IT contracts, system inventories, and physical office and data center locations can be used to identify easy consolidation and cost savings opportunities. Defining a standard language to classify all technologies and applications will save time and money in detailed data collection.
- Develop and communicate the integration plan: IT teams may not prioritize right resources at the right time without clear visibility into integration priorities and timelines. IT integration plans should be developed early in the process to give the rest of the integration team necessary information about the costs of integration, and the impact on business unit resources.Integration plans also provide an opportunity for IT teams to communicate mandatory activities and costs of IT integration. For example, it might be impossible to integrate the two firms properly without integrating back-end networking infrastructure, and so adequate resources should be dedicated early on in the process.