Don’t let poor tech integration planning break an M&A deal.
As mergers and acquisitions deals become more complex, technology integration becomes critically important. Despite its underpinning role, it’s often an aspect of integration that isn’t prioritised early on, is under-resourced and is an area where costs can quickly spiral out of control.
Disjointed technology integration can negatively affect processes between two businesses, as well as put business objectives and synergy delivery at risk. Technology, in my experience, either makes or breaks the deal – it’s that important. M&A deals are subject to heavy financial scrutiny from shareholders and financial advisers, but good technical due diligence is often an overlooked area.
What Type of Deal Is It?
Before considering the technology integration aspects of a deal, it’s important to consider your overall integration thesis and the degree of transformation that’s needed. I typically think about three scenarios. It’s important early on to determine which situation applies:
- Keeping the two businesses separate – a bolt-on acquisition. In this scenario you preserve the individual capabilities of both organisations. From a process and technology perspective, the work is often determining where business models align, if at all, and the key governance points.
- Integrate the businesses and find economies of scale. This involves integrating all activities and ensuring the approach is coordinated across geographies, functions, sectors and business units. This needs a detailed organisation design, process mapping and working through the technology integration approach.
- Use the integration to redesign the business, considering what activities need to be done, how best to do them and what elements to retain. A redesigned operating model will be needed for this and is often a significant cost while repositioning the business for growth and undertaking a business transformation. This often involves a new process and system design with different hand-off and control points, new capabilities, and different governance models.
After understanding the integration thesis, then it’s time to define the contribution and role of technology in the new business design and operating model; understand the impact of process and technology integration on synergy capture and delivery; and define critical processes and systems and work out the integration approach for each.
Technology systems can vary greatly between two companies, and even within one company in terms of status, usability and age. If a technology deficit exists and isn’t noted, it could result in significant time devoted to modernising and upgrading technologies to unify the IT infrastructure.
Integration Lessons Learned
The lessons I’ve learned from integrating companies over the last 25 years include:
Involving technology leadership in the M&A process is critical to success. Any missteps in merging IT infrastructure can cause unnecessary frustration and add a layer of complexity to an already complex process. A lack of planning, testing, communication and expertise can lead to poor results. Leaders can assess and put in place mechanisms to control costs when tech is included in the conversation from the beginning.
Decide which systems and data to keep and consolidate. Business leaders must make decisions about the systems and data to keep and consolidate and bring the right people to the table when discussing these. For example, creating a …