The IT function needs a seat at the table in M&A 

Gerard Lavin at Citrix, a business unit of Cloud Software Group, explains why a consideration of IT issues is essential when planning mergers and acquisitions

Mergers and acquisitions have a strong track record of boosting growth, especially as strategies for incorporating companies and optimising synergies have been fine-tuned over the years. This is the case even amid current macroeconomic turmoil and, as Bain & Company stressed in its M&A Report 2023, “History tells us that companies making bold moves during times of turbulence tend to win over the long term.”

But deals can and will go wrong for many reasons spanning culture to insufficient due diligence. And you can add one more underappreciated potential cause of M&A woes: lack of thought given to IT.

Today, nobody seriously doubts the impact of digital transformation in an age where, as Silicon Valley entrepreneur Marc Andreesen famously wrote, “software is eating the world”. We all need to digitise and automate across our processes and value chains at every turn to move faster, gain cost-saving efficiencies and delight customers.

Yet, when it comes to M&A, IT often fails to get a seat at the table or it is brought in too late. As McKinsey has noted, CIOs are frequently not included in talks and are left holding the baby when deals are done. The result: missing integration and resulting silos that can hurt the value of deals and leave staff feeling disenfranchised at a sensitive time in their careers when they may not know where their futures lie.

Simply put, we need to think again about how we manage IT through M&A. CIOs should be involved early in dealmaking for companies to reduce risks, to ensure synergies are not impacted and to ensure the smooth running of services from day one.

Obvious and non-obvious

IT integration is key to the success of deals in ways that are obvious and non-obvious. For an obvious example, take an automotive manufacturer buying a rival. The rationale of the deal may lie in the opportunity to increase market share, add new products to the portfolio, improve brand awareness, expand to new geographies, achieve economies of scale and save costs by removing back-office overlap.

It all makes sense on paper but if the two companies have different ERPs, IT operating models and design processes, that requires a significant integration plan to be in place, or at least a plan to consider how to cope with a near-term lack of integration.

Now, as a non-obvious example, take a US financial services provider purchasing a European company in the same space. To gain economies of scale and see a single version of the truth, those companies need to align processes and standardise wherever possible.

They may also need to factor in differences in data protection regulatory activity and cultural sensitivities regarding protecting and securing client identities. All of this will require a large dose of input from IT specialists working closely with legal, risk and other departments. 

Moving fast

In large deals especially, IT is often overlooked until the deal has been struck and that leaves only a very tight schedule for integration to begin. CIOs therefore need to move fast in order to onboard new employees who may feel uncertain about the turn in their career paths or scared of the need to learn new processes or adapt to a different culture.

There may not be time to provide the seller’s staff with a managed laptop with a standard corporate software image but as the COVID pandemic and lockdown showed, organisations can still move very fast to stay productive. Thanks to cloud, VDI and remote access, CIOs can still provide users with the comfort of a familiar environment and applications with a simple logon process that works across client devices and an administrative console that ensures IT can control permissions, security profiles and so on.

Mergers and acquisitions may have receded from their peak in 2021 but there’s no excuse for not preparing for deal making and putting in appropriate measures that ensure the smooth running of operations while companies take over, get taken over, combine or demerge.

Every aspect of M&A means managing change and too few organisations prepare the ground, leaving staff with dysfunctional operations, mismatched IT infrastructure and a lack of overarching control. 

Only by thinking carefully about how to use IT to bridge between systemic changes can organisations hope to manage through change optimally and provide the tools and support for staff to be productive. That means supplying IT setups that let staff quickly access key applications without performance degradation or risks to data governance. It also means planning for onboarding so staff can understand new tools and processes. 

The most progressive companies today have effective acquisition platforms that enable them to capitalise on M&A with a ready-made formula for success. Those that don’t face a risky future.  

Gerard Lavin is Field CTO, Citrix, a business unit of Cloud Software Group

Main image courtesy of iStockPhoto.com