Mergers and Acquisitions have long enabled two or more organizations to merge into a single entity to drive better efficiencies, enter new markets, and expand their customer base. But ever since the pandemic, M&As have come into the spotlight. Amidst turbulent economic headwinds and fiscal uncertainty, Mergers and Acquisitions offer a great way to cope with challenging operating conditions.
But despite all the benefits Mergers and Acquisitions provide, many organizations struggle to achieve the intended benefits. Macroeconomic uncertainty has been impacting M&As in several ways. According to a report, M&A deal values fell by 36% in 2022, while volumes dropped by 12%. Many organizations also fail to integrate their technology and operations seamlessly.
Read on to learn why a well-planned strategy for IT integration via reliable M&A Consulting Services is critical to M&A success.
What Is the Role of an IT Integration Strategy?
An M&A integration strategy outlines how to merge the IT systems and processes of two companies during a merger and acquisition, aiming to boost synergies and optimize business operations for successful outcomes. The objective is to reduce disruptions and maintain smooth business operations as seamlessly as possible.
An IT integration strategy is a key part of any M&A transaction. It sets out the plan and objectives when merging two businesses together. It proactively manages potential risks and challenges from the onset of the merger and acquisition process. It also takes into consideration the company culture, processes, and systems of the companies involved.
Creating an IT Integration Strategy for Mergers & Acquisitions
Given the current state of business, the number of M&As is expected to rise in the next few years. But despite how well the business strategies of those getting together are aligned, IT synergies are often elusive. For such organizations, integrating technology and operations is sure to prove difficult, usually because of inadequate consideration during the M&A due diligence stage. A haphazard approach means executives have little or no idea about the costs and practical realities of IT integration – draining value from the merging.
The successful integration of IT systems plays a crucial role in the overall success of the M&A deal and the realization of synergies and efficiencies. A robust IT integration strategy can help in consolidating and aligning the information technology systems, applications, data, and infrastructure of the two companies.
A robust strategy can help in:
- Streamlining IT infrastructure, rationalizing systems across both enterprises and ensuring seamless M&A integration.
- Building a flexible, agile, and scalable IT architecture that can keep up with the pace of new trends and disruptions.
- Making disciplined decisions about which systems to integrate, which to modernize, and which to remove.
- Capturing a broader range of synergies across IT infrastructure, application portfolio, end-user support, and system administration at a faster pace than competitors.
- Having well-equipped systems in place to drive short-term savings and support the company’s long-term growth ambitions.
Setting Clear IT M&A Ground Rules
A traditional integration model may not work in the case of IT integration. Instead of providing differentiated capabilities, such an approach will end up making IT a cost center and rarely a value enabler. Since a one-size-fits-all approach can never deliver the results different organizations seek, here are a few tips to set clear IT M&A ground rules:
1. Assessment is Key
When two businesses come together, the corresponding IT landscape that they generate is massive. No matter how complex or time-consuming it might seem, assessing every system, application, infrastructure, and device is critical to the long-term success of the M&A. In-depth assessment of legacy systems is particularly important as they tend to produce several inconsistencies and inefficiencies in the long run. Cloud applications, on the other hand, may require less integration and maintenance and can be more easily configured and scaled for evolving needs.
Before the deal is finalized, both parties must thoroughly assess each other’s IT infrastructure, applications, data, security protocols, and processes. This due diligence helps identify potential integration challenges and estimate the cost and time required for the integration.
2. Abandon the Traditional Integration Approach
In M&As, it is common for the target company to blindly adopt and embrace the IT platforms and practices of the purchasing company. But to achieve the expected synergies, you must abandon the traditional approach to integration. Rather than just migrating every system as-is, adopting modern service-oriented architectures or microservices can be extremely beneficial. This can help ensure that the resulting IT landscape is flexible and adaptive and accommodates a wider range of business applications.
The two organizations must also have a plan to map, transform, and migrate data to ensure seamless continuity of operations. They must also carefully integrate various software applications and streamline business processes to ensure smooth operations of different functional units.
Since compatibility issues and customization needs may arise, careful planning and execution are key.
3. If IT Doesn’t Add Value, It Doesn’t Need to Exist
When faced with an M&A, CIOs should carefully understand the value each system offers to the integrated business. To do this, they must develop a comprehensive IT integration plan. This plan must outline the steps, timelines, and resources required to integrate the IT systems of the merging entities. The plan should also identify critical systems and prioritize integration based on their impact on business operations.
Instead of going through the hassle of integrating every system, merging entities must scrap legacy back-office systems. They must also eliminate inefficient business processes to reduce capital costs and eliminate silos. Remember: any system that doesn’t add value should be immediately discarded – of course, after careful consideration.
How Does Your Strategy Align With the Bigger Picture?
Successful IT integration in M&A requires meticulous planning, clear communication, and collaboration between the merging entities. A well-executed IT integration can lead to increased operational efficiencies, cost savings, and improved overall business performance. Conversely, a poorly managed integration can result in operational disruptions, data loss, and decreased productivity.
Therefore, companies must approach IT integration as a critical component of their M&A strategy and invest adequate time and resources in its planning and execution. Having IT and business leaders work closely during the M&A planning stages is important to ensure they agree with the merger’s strategic goals. This also ensures they are on the same page when it comes to timelines, costs, and the risks of integration. Since better communication increases the chances of a successful merger, key leaders must always be a part of broader strategic decisions.
Having detailed and extensive discussions about IT during the M&A due diligence stage can help in identifying potential obstacles to integration as well as potential liabilities: right from incompatible platforms that do not align with business goals and lack of investments in modern technology systems that are in line with the current business landscape.
Since IT integration is not just about technology but also involves people and processes, cultural and organizational differences should be carefully assessed. Effective change management and communication are vital to overcoming these hurdles.
Get the Best M&A Results
For businesses struggling to adjust to a volatile operating environment, Mergers and Acquisitions offer a great way to keep their heads above water. Offering better cost and operational efficiencies, they can help drive the required revenue and profit while ensuring customer service is not hampered.
However, when it comes to defining a robust IT integration strategy, partnering with an experienced and qualified M&A Consulting Services provider can ensure the best M&A results. Through robust M&A Integration Services and proper planning and due diligence, an M&A Consulting partner can make sure the resulting IT ecosystem is modern and capable.
A partner can also help eliminate unnecessary uncertainty, allowing you to focus your energy on how best to make the transition work. Post-integration, M&A Integration Services can ensure ongoing support and monitoring, address post-merger challenges, and ensure the systems continue to function as intended.
Engage with an M&A Consulting Services partner today to set the right M&A goals and vision and drive the required value.
