1. Practical IT Research that Drives Measurable Results Make IT a Partner in a Successful Merger or Acquisition

2. Introduction When an organization goes through an M&A, IT must review and revise its current applications, infrastructure, and staffing to address the needs of the new organization. However, M&A activity can arise with little lead time, and IT management must make quick decisions as to what needs to change in IT to support the new organization. Making the wrong changes in the wrong sequence can keep the organization from meeting the business objectives of the M&A. It is crucial to build a solid plan that outlines how IT will help the organization to meet the business objectives of the M&A. To create the M&A plan, focus on aligning IT with the M&A objectives by determining the target technology environment that will help the organization to achieve the M&A goals. Keep IT off the critical path. Focus on creating an M&A plan that will guide the business smoothly through the transition, then execute the plan effectively and efficiently.

3. Executive Summary Mergers & acquisitions (M&A) often instil fear in the hearts of IT leaders, who wonder what will become of their people, processes, and technology in the new organization. However, an M&A doesn’t need to induce panic or sidetrack your career, and isn’t rocket science for IT to execute. Info-Tech research shows that IT leaders who create a detailed M&A plan with specific timelines outlined for application, infrastructure, data, and staff integration are more likely to achieve their M&A goals. IT should focus on two main factors to create a solid M&A plan: The business objectives of the M&A. The target technology environment that will help the organization to meet the business objectives. Decisions around how to proceed with applications, infrastructure, and staff then fall naturally from the M&A business objectives and target technology environment. Don’t let IT hold the organization back. This storyboard will help you to: Align IT with the M&A goals. Plan for the new organization. Execute the M&A plan quickly and effectively using best practices from IT leaders who have done it themselves.

4. 4 Plan for the New Organization Create the M&A PlanGet Ready for Day One Align IT with the M&A Goals Prioritize and Cooperate Identify M&A Goals Determine the Target Technology Environment Execute the Plan PeopleProcessTechnology

5. Understand IT’s role in three key M&A phases to begin prioritizing projects and preparing for inevitable changes One organization is interested in buying another, but no one has agreed to anything and the negotiations are kept largely confidential. Executives will typically ask IT for an inventory of existing applications, infrastructure, and staff, as well as financial/budget data. The CIO will often be required to withhold information about the potential M&A from his/her staff until a formal decision and announcement is made. Due Diligence The decision has been made for one organization to buy another. IT needs to decide on the post-merger technology environment that will help the organization to meet its M&A goals. To do this, IT must compare the applications, infrastructure, and staff in place at each organization, assess gaps, and outline a plan to accomplish the necessary changes to enable combined operations. IT must also ensure that it will continue to deliver stable, reliable operations throughout the transition. Pre- Launch After day one of the two organizations operating as a combined entity, IT will need to continue to deliver uninterrupted service, while working towards the target technology environment outlined in the M&A plan. Depending on the target environment, IT will focus on executing consolidation opportunities, establishing links and gateways between critical systems, and/or maintaining independent systems. Post- Launch

6. Make the M&A your number one priority, as most M&A s result in significant changes to the existing technology environment A merger or acquisition is generally a game changer for IT Management in both the acquiring and acquired organization. IT must reassess the priority of current initiatives to provide capacity for the M&A plans. Proactively plan to make informed choices about the new organization’s applications, infrastructure, and IT staff by:  Developing a clear understanding of the M&A goals.  Assessing what your company and the other company already have in place.  Identifying the target technology environment for the new organization.  Creating a solid plan to move towards the target environment.  Executing the plan as smoothly and efficiently as possible. 7% Each department operated largely as a separate entity by keeping its existing technology The new organization adopted a completely new set of technologies The technology set of the acquiring organization was adopted A mix of technologies from both of the organizations were adopted Show leadership or become a victim. 93% of M&A events result in significant changes to the existing technology environment. Only 7% of IT departments remain independent after the M&A. N = 71, Source: Info-Tech Research Group

7. Cooperation is the best policy to establish yourself as a valuable leader during the due diligence phase Due diligence is an opportunity and risk assessment that is conducted by the acquiring company. This assessment is done to identify whether it makes business sense for the two companies to come together. The role of the CIO from the acquired company during due diligence is rather passive. The best thing to do is to cooperate by providing any and all information that is asked of you. The CIO’s role in the acquiring company should be more active. Get involved by helping the organization to identify challenges or opportunities for IT that may arise from the M&A. It doesn’t pay to hide information at this stage. If you fudge financial numbers or make your department appear better than it is, you could face legal ramifications.  Applications (e.g. whether a common architecture has been implemented, licensing agreements, operating systems).  Infrastructure (e.g. quality of hardware, compatibility between networks and databases).  Staff (e.g. key knowledge that can’t be lost, strengths/weaknesses, compensation).  Costs/budget/financial data (e.g. capital investments needed, cost to continue operation).  Vendor agreements/contracts (e.g. suppliers, contract duration, costs).  Security/business continuity (e.g. DRP processes).  Current and planned projects. The acquiring company will be looking for opportunities and risks with regard to the following factors: “Cooperating during due diligence is a must. It will either get you a good position at the new company, or at the very least get you a good severance package.” -IT Director, Business Services

8. To maximize your chances of success, start with an understanding of the business goals of the M&A 76% Did not achieve M&A goals 50% Achieved M&A goals Discussed the goals of the M&A with executives Did not discuss the goals of the M&A with executives  Extend capabilities. The acquiring organization is hoping to expand its capabilities by adding products or technologies from the acquired company.  Combine similar businesses. The acquiring organization is hoping to increase market share by absorbing a business that is similar to theirs (e.g. one bank buys another bank).  Improve margins. The acquiring organization is hoping to reduce costs by eliminating redundancies in people, processes, and technology. Common M&A Goals:  Review the M&A business case. Ask to see why the executive team is considering the M&A.  Be proactive. If you don’t know what the M&A goals are, ask! Tips to uncover the M&A Goals: IT leaders who discuss the goals of the M&A with senior-level executives are more likely to achieve their M&A goals. N = 53, Source: Info-Tech Research Group

9. Get involved in a cross functional team that will lead the M&A. IT leaders who do so are more likely to achieve their M&A goals. IT leaders who are involved in a dedicated cross-functional team with executive presence are more likely to achieve their M&A goals.  Be proactive. If you aren’t invited to be a part of the integration team, ask to be.  Get information where you can. If an integration team has not been created, ask a senior level executive about the M&A objectives.  Clarify IT’s role. Pay particular attention to outlining how IT can help the organization to achieve M&A goals. When executives bring up their objectives, explain how their goals will impact IT. Tips to get involved with the integration team: Did not achieve M&A goals 68% Achieved M&A goals 88% Not involved in a cross-functional team Involved in a cross-functional team N = 53, Source: Info-Tech Research Group

10. Include external help in your M&A plan if the degree of change required is high and organizational change capability is low Unlikely scenario; most M&As have significant change objectives. Target Unlikely scenario; most M&As have significant change objectives. Trouble Organizational Chang e Capability Degree of Change High Low Seek external help from a third party, such as a consultant who has extensive experience guiding IT departments through M&As. Low For organizations without extensive M&A experience, consultants can help to provide suggested timelines, integration strategies, and a solid communication structure.

11. Understand four possible target technology environments that can help the organization to achieve its M&A goals Independent Models Links Between Critical Systems Move Major Functions to Common Systems Adopt One Model In this case, both organizations remain relatively independent after the merger or acquisition, by largely retaining each department's existing people, process, and technology. This is appropriate if the merging organizations are to remain fairly independent; if there will be limited or no communication between companies; and the companies' go-to-market strategies, products, and channels are entirely distinct. In this case, the two IT departments are partially integrated. Gateways and linkages are created between critical systems such as ERP and CRM. This is appropriate when the organizations need to be slightly integrated. There will be some central coordination, sharing of business practices, and cross selling. These organizations seek to capture some obvious synergy opportunities, like procurement and payroll. In this case, the two IT departments are closely integrated. Major functions, such as ERP and CRM, are consolidated onto common systems. Organizations that will require central coordination and leadership, integrated and consistent sharing of best practices, and consistent performance metrics would migrate major functions to common systems. In these organizations, a network distribution channel emerges, and facilities and back office functions are selectively consolidated. In this case, the two IT departments are completely integrated. All functions are consolidated onto common systems. This is appropriate when there will be a corporate hierarchy with centralized management and a common product offering. An enterprise-wide solution is necessary to accommodate the single business model.

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