Strategic Businesses Opportunity in M&A transactions

M&A transactions consist of lots of processes pre and post-deal. Mostly in the current scenario, everything is done digitally in an M&A transaction. The company plans its acquisition strategy to get the best out of the transaction. But they do tend to miss to assess the IT readiness of their company.

IT systems and processes are used for all business functions. In a strategy that is built for merger or acquisition, the IT impacts can be seen in simple integrations as well as full systems integration/migration, in an extension of IT service delivery (e.g. systems support and operations) and new acquisition. When a company fails to have IT readiness it causes damage not only to the IT department but to the core parts of the business.

Extension of IT service delivery can impact MSME majorly causing them to easily represent a 25% or larger increase in the IT footprint (measured in IT-enabled workers, infrastructure, and systems) with just a single merger.

Taking the conventional and convenient route, companies don’t believe in migrating the acquiring company and prefer to integrate systems to avoid the clash of differences in business processes. However, it was not possible because of a lack of IT readiness. This had numerous dreading impacts.

The rolling up of financials was not systemically done as monthly, quarterly, and year-end closing processes, as well as bank filings, were manually vigorous for 24 months post-merger. The risk increased when the responses to financial audits turned labor-intensive. Operations processes also were wounded and had to use temporary labor and manual effort to keep operations at the right place.

Lack of readiness and planning to extend IT services (help desk, desktop support, employee onboarding/off-boarding, etc.) to the acquisition resulted in a massive drop in IT service levels. Low morale made key people leave the company post-acquisition because of poor IT integration.

It cost a huge fortune for a company to integrate its IT systems and services which were around 4x the anticipated cost and took a lot more time than originally planned.

That’s the horror story of what can happen when IT readiness isn’t understood. On the contrary, if the merger is carried out after knowing the readiness of different aspects of the company, the post-integration seems to be done much easier.If a company’s M&A planning generates a few likely integration scenarios before executing the merger. An IT and systems readiness assessment is checked for those scenarios, looking at:

Business process readiness – A high degree of understanding of core business processes is needed, both within the business and within IT. IT is paralyzed without requirements, and business processes are where they come from. The absence of subject matter experts in the process leads to integrating systems or migrating new people to current systems which can be challenging for the company.

Architecture and systems readiness – Having an architecture as good as or better than the target company always helps the cause. The company should check whether current applications and infrastructure healthy and stable to handle the addition. If not, what interface options are there, and is IT currently staffed to handle their development and future maintenance? Also, the company should look for contract/partner options that are there to farm out that work at a reasonable cost.

Service delivery readiness – Based on the post-M&A integration scenario, IT should take a step to extend services to a significant number of additional workers. Is support staffing adequate or will it need to be shored up? It is required to think of the acquisition staff and their positions in the IT department. This may lead to changes to the IT organization and/or improvement projects to make better use of current staff.

Integration options that are cost-effective and satisfy the time constrain should be considered to fill the gaps highlighted in the article. Projects to achieve readiness are planned and executed time for the merger to occur in time, building up the post-merger integration activity for success.