1 13 June, 2006 IT & M&A – A Problem or an Opportunity? Research Findings Presented by F. Vielba BCS Consultancy Group Event

13 June Agenda Key points from the research Key points from the research What should CIO’s do when facing an M&A? What should CIO’s do when facing an M&A? Future trends Future trends

13 June Key Points from the research M&A is increasingly a part of CIO life M&A is increasingly a part of CIO life IT is more central to the business so the stakes are higher IT is more central to the business so the stakes are higher M&A poses significant technical challenges M&A poses significant technical challenges M&A calls for well-developed management skills M&A calls for well-developed management skills IT needs to be involved in the M&A process from the beginning IT needs to be involved in the M&A process from the beginning Because M&A is growing companies need to get better at learning Because M&A is growing companies need to get better at learning

13 June Number of deals TIME Number of Deals ,000 M&A Activity over time (last 100 years)... In waves which coincide with economic activity Illustrative only

13 June UK Scene – Cross Border Acquisitions In £ billions Source: FT, February

13 June Victor mentality Victor mentality Flawed rationale behind merger Flawed rationale behind merger Lack of post- deal acquisition plan The pitfalls are clearly sign-posted Focusing only on the financial arrangements Focusing only on the financial arrangements Lack of strategic fit Inadequate pre-deal plans Lack of understanding cultural sensitivities Lack of knowledge of target prior to deal Acquisition targeting was haphazard Lack of clarity in the value creation logic CEO’s whim and prejudices dictate need for and pace of acquisition/merger CEO’s whim and prejudices dictate need for and pace of acquisition/merger Underestimation of costs Underestimation of costs Machismo and hubris provide the motive force Machismo and hubris provide the motive force Underestimation of complexity of integration Underestimation of complexity of integration Lack of sponsorship Lack of credibility of implementation team Lack of communication Vision not clear or not articulated Vision not clear or not articulated Lack of attention to detail Lack of attention to detail... Most of these signs apply to IT

13 June Decision to merge or acquire Technical issues Company A Company B Management issuesBusiness issues BTM Model – Issues Encountered Normal Operation

13 June Prior M&A experience M&A strategy M&A target M&A decision M&A implementation timetable IT Strategy within the business Role of IT in the business Role of IT in the M&A team Due Diligence Management of the M&A process IT is more central to the business So the stakes are higher…. Business Context

13 June M&A poses significant technical challenges Centralised/decentralised In-house versus packages Lack of standard systems Incompatible technology Untested technology Data migration Interface problems Scalability So ensure that your team has the right technical skills … IT Context

13 June M&A calls for well developed management skills Delivering the IT synergies Creating a shared vision Leading the change Planning and Organizing Selecting the M&A IT team Retaining key skills Dealing with cultural issues Managing communications Dealing with suppliers/customers Doing the review process and learning points So ensure that you are well equipped for the journey … Management Context

13 June Due Diligence  I WILL CONCENTRATE ON THE FIRST AND LAST PHASES  THE OTHER SPEAKERS WILL TALK ABOUT THE MIDDLE TWO PHASES Phase Model PHASE 1 Detailed Assessment IntegrationReview PHASE 2PHASE 3PHASE 4

13 June IT needs to be involved from the beginning To provide business continuity To provide business continuity To estimate the technical risks and costs To estimate the technical risks and costs To enable business synergies To enable business synergies To play an active business role To play an active business role So ensure that your CEO understands that…

13 June Companies need to get better at learning To avoid costly mistakes To avoid costly mistakes To beat the competition in a M&A bid To beat the competition in a M&A bid To be successful To be successful To avoid disappointments To avoid disappointments So ensure that your company has a process to do that …

13 June What should CIO’s do? Have a clear IT strategy that includes M&A planning Have a clear IT strategy that includes M&A planning Get the right technical and management skills Get the right technical and management skills Buy the expertise if you are new in the M&A field Buy the expertise if you are new in the M&A field Adopt a structured approach and integrate quickly Adopt a structured approach and integrate quickly Carry out due diligence as soon as you can Carry out due diligence as soon as you can Do detailed assessment and planning Do detailed assessment and planning Carry out a post-implementation review Carry out a post-implementation review

13 June Future Trends The role of IT in M&A will grow in importance as will the risks and opportunities for CIOs The role of IT in M&A will grow in importance as will the risks and opportunities for CIOs Companies will adopt a more holistic approach to M&A and IT will be an integral part of it Companies will adopt a more holistic approach to M&A and IT will be an integral part of it CIOs will become more adept at managing business transformation projects such as M&A CIOs will become more adept at managing business transformation projects such as M&A

13 June A problem or an Opportunity? That depends on the approach That depends on the approach For well prepared companies IT can represent an opportunity For well prepared companies IT can represent an opportunity For the “unprepared” IT can be a big problem For the “unprepared” IT can be a big problem

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