Mergers and acquisitions (M&A) are an opportunity to transform, not just transition. By reimagining the new organization’s IT environment, an M&A integration can drive innovation and create new value through technology.
The Overlooked IT Opportunity of an M&A
Due to the current economic climate, M&A plans are under extreme scrutiny to deliver value quickly. April 2020 marked the first month since September 2004 that there were no merger and acquisition deals over $1 billion. This echoes reporting from McKinsey & Company that only half as many M&A transactions were completed in March 2020 as in March 2019, with many of this year’s planned transactions put on hold or canceled due to the coronavirus pandemic.
And with the volatility in the volume of M&A deals happening in 2020, time to value becomes even more critical. IT integration mistakes can diminish M&A benefits and extend the time to achieve value. The most successful IT integrations realize benefits quickly and yield a 6%-12% higher return for shareholders. PwC reports that 58% of organizations involved in an M&A expect to gain value through access to new technologies, but only 35% believe they’ve realized those gains. Recognizing the value of IT integration, 48% had full-time personnel dedicated to IT integration and over half (52%) had a technology plan in place.
Unfortunately, in the quest to cut costs and move nimbly toward aligning processes and resources during an M&A integration, the opportunity to turn IT into a center of innovation is often missed. To find and act on opportunities to transform, organizations need a clear vision and a strategy that addresses organizational challenges presented by the M&A.
Common M&A IT Challenges
Each M&A deal presents a unique set of IT challenges. Most of those obstacles fall into the following groups:
Business process alignment
To deliver the full value of an M&A integration, duplicate business processes and technology resources, especially data, must be reconciled, transformed and integrated. Instead of just combining environments, teams have an opportunity to take a holistic look at the disparate environments and design an ideal end state based on the needs of the organization, not status quo technology.
Beyond just merging IT environments, the post-M&A IT integration should deliver a better solution with capabilities that exceed what was possible before. However, different technology stacks, a confused data architecture and overlapping applications can complicate the process. Business process alignment should guide your technology decisions – not history or preference.
IT culture and operations
Rebuilding a new culture and operational structure is often regarded as the most challenging part of an M&A integration. To support the speed required to become competitive, the new organization’s culture and operations have to evolve. Take a hard look at where there are potential skills gaps, opportunities to re-skill the existing team and ways to reduce operational burdens to support the organization’s future.
Harnessing the M&A opportunity
If you’re facing an M&A IT integration, seize the occasion to craft a new “desired state” for the organization. As soon as possible, take an honest assessment of your existing resources and what resources the new entity brings with it. Evaluate the tools, skillsets and processes of the new entity, how they can support your “desired state” and how they can drive broader organizational goals. If possible, be proactive and reach out to the other IT team and involve them in your strategy-making process.
The objectives of an M&A integration are unified goals, aligned processes and realized synergies. When these are achieved, they generate significant benefits to your IT department and across your organization. A successful M&A IT integration can open opportunities for new business models. With an integrated and modernized environment, the new organization can support superior customer experiences driven by innovative technologies like AI, machine learning and IoT to give the organization a competitive advantage.