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How CIOs Can Make Mergers Work



By Edward Cone


The failure rate for mergers and acquisitions is painfully high. Making the CIO a key part of due diligence is one way to increase the odds of success.

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Many or most corporate mergers fail to meet their objectives. One thing that might up the success rate: getting the CIO involved in due diligence from the start.

“The CIO needs to have a seat at the table” in the merger-planning process, says Nan Morrison, a partner in Accenture’s Strategic Information Technology Effectiveness practice.

Traditionally, due diligence in advance of mergers and acquisitions focused on financial aspects of the deal. Now many companies are looking more closely at operations and the complexities involved in bringing two organizations together. These are areas in which IT can and should play an important role.

Among the questions that she says need to be asked and answered by IT management: “Can you support the business objectives? Can you put two financial or business functions together? Are the HR, finance, or customer policies wickedly different, and will it be a big deal to harmonize them? Do we have the capabilities and capacity to support the business objectives? How much time will it take?”

Costs, contracts and ongoing projects need to be vetted carefully as well, she says. Companies can be tied down for years by restrictive IT contracts, for example, or they may need to purchase support services from their former parent organization. A big, messy implementation might need to be finished at significant cost—or a timely project that fits well with the merging entity’s own plans could be a big cost-saver.

Companies that do mergers and acquisitions well often do them on a regular basis. They  tend to have well-defined processes in place, Morrison says, with checklists and guiding principles for all deals. And they include IT on the merger team.

A typical merger steering committee includes the CEO and direct reports, so many CIOs should be included automatically. Just sitting at the table, though, is not enough. “It helps if that person is a business-oriented, strategic thinker,” says Morrison. “The ability to prioritize, to define tradeoffs, and to understand the synergies and business changes related to IT makes a big difference.” But even a more tactical CIO needs to be part of the process. “If the boss says, ‘Get as much cost out as possible,’ that’s a marching order that defines the job.”

And CIOs needs a strong merger team of their own, too. That includes a fulltime project leader, and leaders for key areas such as infrastructure and applications. “Put together your best people,” Morrison advises. That could include system architects or database experts—anyone who is relevant to accomplishing the stated goals of the deal. A strong financial person should be involved, too.

It’s important to mobilize early, and to quickly establish a hypothesis of your future operating model—who stays, what the applications look like, your governance structure and sourcing strategy, and so on. Take a strategic view of the whole IT operation, and figure out the costs and financial goals, along with the operational and business risks involved in the transition. Then come up with a list of what needs to be done, and prioritize the most important three or four items to be done in the first year.

“This is like doing IT strategy on speed,” Morrison says.

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