Integrate, Migrate or Separate? How to Get the Most out of an Acquired Company’s Technology
Integrating people, processes and technology takes time — and a lot of thought.
2021 is already a record-breaking year for mergers and acquisitions, with $2.4 trillion in deals on the books as of early June. But new acquirers shouldn’t pop the champagne quite yet. Getting full value out of an acquisition takes a lot more than just inking a contract — it’s a long process that involves careful thinking about how to achieve your strategic goals.
In particular, you need a detailed plan that describes how you will integrate the acquired company’s technology with your own. And I’m not just talking about the shiny pieces of proprietary tech that might be the reason for your acquisition in the first place. Deciding the fate of the acquired company’s everyday tech — like marketing and sales tools, back-office finance and billing systems, and third-party communication and collaboration software — can be just as important to the success or failure of the new relationship. For every piece of tech, you have to decide between three courses of action:
- Fully integrate it into your own stack.
- Sunset it and migrate its processes and data to another platform.
- Let it run parallel to existing systems, at least for a time.
Making these decisions can get complicated. To do it right, you’ll need to consider both big-picture concerns, like the overall purpose of the acquisition, and granular details, like the length of licensing agreements. But ultimately the time investment is worth it to ensure you’re getting full value out of your acquisition, including the integration of people, process, and technology.
7 steps to develop your tech integration plan
You’ll get the best results out of the integration process if you treat it like a structured program, with clear milestones, set timelines and regular reporting. Many companies set up an integration management office (IMO) to manage the transition — touching not just technology, but also considerations like how to onboard the acquired company’s employees and customers to the new brand.
Integration plan milestones and key decision-making should be identified at the 30-, 60- and 90-day marks, and the results monitored closely for at least 12 months after the acquisition. To ensure the tech side of integration proceeds as smoothly as possible, make sure the following steps are a part of your process.
1. Define your goals.
Too often, the goals of an acquisition are only vaguely defined. Before you decide what to do with the acquired company’s technology, you need a clear understanding of the ultimate purpose of the relationship. For example, if the acquisition is an acqui-hire focused on absorbing the acquired company’s talent, it may not be necessary to integrate any of their technology at all. But if your goal is to consolidate with a competitor and cross-sell their products to your customers, integration of those products and the infrastructure that supports them may be key to success. Understanding the type of acquisition you’re aiming for is an important first step in building an integration plan.
2. Develop a clear plan for each product or service.
Once you understand your broader goals, develop a clear vision for each of the acquired company’s products and services. Determine which of them have the highest value to you because they fill a gap in your own portfolio or because they offer high margins or strong revenue. Technology related to those products and services is worth investing in for the long-term, whether that means maintaining it in parallel with your systems or integrating it with your existing infrastructure. By contrast, technology related to lower-value offerings can likely be phased out, and its data and processes migrated to your systems.
3. Be willing to change.
Don’t put the burden solely on the acquired company to adapt to your existing processes and tools. An acquisition is an opportunity to make both companies better, so you should be open to change, too. It’s possible that in some areas, the company you’ve acquired has better systems in place than you do. Start by looking at systems in foundational categories like sales and marketing, finance and billing, and so on. Are there any areas where you’d welcome improvement? In that case, the acquisition could be the catalyst to break through inertia and make an impactful long lasting change.
4. Take an inventory of their technology.
Begin your integration process with a discovery phase where the acquired company teaches your team how they run their business. Your goal should be to understand their entire process for generating revenue, from identifying leads to receiving payment on invoices. You need to understand where revenue is coming from so you don’t unintentionally disrupt it when you begin integrating the acquired company’s tech.
Pay close attention to the technical components that underpin each function, especially any processes that are automated. This will help you identify which pieces of technology are significant differentiators that should be preserved in the transition, and which are less important. You will want to request an actual list of every tech tool they use so you can see how it aligns with your existing infrastructure.
5. Consider running useful technology in parallel.
Sometimes there are good reasons to not integrate or migrate certain systems and instead let them run in parallel with your existing processes. For example, if the acquired company has a strong brand in an area where the acquirer’s current offerings are still emerging, it might make sense to maintain that separate brand and some of its associated sales and marketing infrastructure. By keeping the top of the sales funnel separate, you might be able to capture more revenue from customers in the long run.
On the flip side, there can be downsides to keeping your technology separate for too long. For example, to integrate the two companies’ cultures, it’s important for all employees to be part of the same information flows. That can be difficult to achieve if the acquired company uses a different communication and collaboration platform than the acquirer. In the long-term, technological silos can become cultural rifts that dampen engagement, increase attrition and hold you back from achieving the acquisition’s overall goals.
6. Decide how to handle data.
The acquired company’s data on different customer sets can be one of the most valuable gains from an acquisition — but it can be a challenge to integrate that data with yours in a way that produces useful research. Step one is figuring out how to combine the underlying tech infrastructure. If the acquired company uses a different cloud provider, you may need to build a multi-cloud strategy to integrate the data they store there with your own systems. While this can be a major effort, it’s often worth the insights you can gain from merging and mining datasets.
7. Align contracts and licensing.
Once you have the larger integration plan hammered out, it’s time to dive in on the details. Examine any third-party software contracts — when do they expire or come up for renewal? If your company and the acquired company license the same software, you’ll want to line up contract renewal dates, terms and conditions, and subscription plans going forward. If the acquired company is getting a better deal from the software vendor, you may even be able to leverage that to find additional savings for your company.
Taking a long-term view
Don’t make the mistake of thinking that integration ends on the day you welcome the acquired company’s employees to your organization. Integrating people, processes and technology takes time — and a lot of thought. By laying the groundwork on the technology side from the beginning, however, you can set all elements of your integration up for success — and derive maximum value from your acquisition in the long-term.