IT and M&A: From Satisfactory to Superb

By Dave Edwards
Senior Consultant

By Craig Loughrige
Senior Consultant

Every workday offers a series of opportunities and obstacles, most requiring little or moderate effort to effectively resolve. Only occasionally do opportunities rise to the level of strategic importance for which a thorough understanding, careful planning, and effective delivery of results can lead to career-changing outcomes. A prime example is a merger or acquisition. Whether one is a member of the acquiring or target firm, executives, directors, and managers have a rare shot at enhancing the strength of the combined companies, their divisions, and their careers. For IT leadership, the challenges faced during company integrations can be particularly daunting but commensurately rewarding.

While almost all executive teams consist of members extremely knowledgeable about their own functions, it’s unusual to find non-IT senior leaders who broadly and deeply understand the IT discipline. However, all are keenly aware of the typical components of an IT project, particularly those of the large, visible variety. The following is an example of a very high-level process flow that many executives might expect:

Meaningful deliverables from each of these steps are expected and represent table-stakes, high-level project planning for a satisfactory integration outcome. And while effective execution of each of these steps might require immense work by IT—much of it unseen and affecting every aspect of the business—seamless management of the steps and the certain speed bumps encountered along the way is simply a minimum requirement.

IT executives are presented with many choices during an integration, but one of the first and most fundamental is whether a “satisfactory” integration is, well, satisfactory. Often, the integration offers a strategic platform upon which to advance the company, the IT executive, and all members of the IT division. Both paths bring risks, stresses, and rewards. However, we’ve found that when executives elect the path with greater improvement potential for their firm, division, and career, six blended elements help ensure that IT integration results are not merely satisfactory and appreciated, but superb and long remembered.

1. Develop and exercise bilingual fluency: Technical competency is too often the IT executive’s only language. All members of an IT organization—and particularly its executives, directors, unit managers, and project managers—should understand the business and be fluent in that language. “Business” should be the primary language spoken by IT during inter-functional integration meetings and in inter-functional communications.
2. Inject expectations management: Far more than simply guarding against scope creep, this process, which is not a single event, begins with a clear, detailed understanding of the results of pre-merger due diligence and a crucial discussion with the CEO. The handful of quantitative and qualitative measures defining integration success are identified and documented during this conversation, the importance of which can’t be overemphasized. A solid understanding of the CEO’s vision for the post-merger company is critical to IT’s success. The IT executive has an opportunity here to clarify the typical merger outcomes of increased market penetration, geographic coverage, and broadened product diversity. The almost certain expectations surrounding operational scalability and IT expense ratios can be articulated here, too. This initial discussion with the CEO is the first step in a series of communications with executives, line organization leaders, and key stakeholders across the companies, which tend to be heavily front-loaded during the early phases of the integration effort.
3. Engage line management: Subject matter experts and, ideally, designated decision-makers from each affected line area should be core members of IT integration teams, beginning with the early discovery phases and extending through implementation and closure. The routine presence of these important people helps ensure buy-in to the ongoing process, an understanding of how team activities fit into the overall integration strategy, a consistent presence of detailed operational understanding, and a ready conduit of two-way communication between the teams and leaders of affected stakeholders.
4. Display executive-level tactical leadership: Because the IT element of the integration typically touches every division of both firms, the IT executive is in a unique position to provide options and recommendations related to the CEO-stated strategic expectations. The IT executive can also influence the end-state capabilities of the merged entity. By dispassionately framing integration progress discussions in terms of timelines met, in jeopardy, or missed; economic improvements achieved; critical capabilities installed; and upcoming milestones and events relevant to peer executives, the IT executive can boost his or her reputation for technical competence and business savvy.
5. Conduct intra-IT division integration progress meetings: Despite the best planning efforts, and even when integration progresses smoothly, the overall management effort is significant. The complexity requires IT leaders to be conversant with not only their own integration accountabilities, but also those of their peers, particularly because peer activities often affect the quality or timeliness of others’ integration results delivery. It is also important to understand each IT group’s methods and tools, agreeing on specific ideas as to how things will get done, not just what.
6. Illustrate and communicate IT organizational designs: These designs should address the integration period, detailing existing skill sets and staff capabilities and existing resource levels. This includes the resources needed to effectively complete the integration and a quantitative statement of when such temporary, targeted resources will be required. The organization structure of the integration period should also be clearly drawn and communicated, ensuring effective spans of control and, if needed, temporary shifts of roles to accomplish integration goals within specified timelines. The final portion of this element is a design of the post-integration IT structure, supporting going-forward business requirements surrounding applications, development, testing, infrastructure, project management, reporting, and quality checks. A clearly visible element of this post-integration design should be an economic assessment of IT’s expenses against value achieved from the synergies of the merger.

Weaving these considerations into a standard merger process plan requires significant reflection and care. We believe expending that effort is worthwhile because it will produce at least three important outcomes: 1) an inclusive, effective tactical IT integration; 2) an enhanced IT integration model that can be used again in future integrations to yield results greater than would otherwise be expected; and 3) a chance for the IT executive to elevate his or her game around the executive conference table, increasing influence not only for the tactical integration at hand, but as a strategic-thinking partner for the organization.