MAD thinking

I’m researching for an event I’m facilitating next week on IT’s contribution to mergers & acquisitions. There seems to be a remarkable dearth of analyst insight on this topic, apart from a short-ish paper from A T Kearney specifically on post-merger integration. Divestments aren’t on this particular agenda: but can’t be ignored, because most big mergers involve divestments too. A pair of pharma companies have to divest some important drugs, perhaps, or grocery chains to sell some branch stores in order to gain competition authorities’ approval.

So here are some thoughts, which I might develop more fully later.

1 – segmenting the discussion

There are three aspects of IT’s participation in M&A, which can pretty much be separated out. In each of the three, there are key issues.

First, of course, there are issues internal to IT. Technically, these resolve primarily onto infrastructure, which no-one else touches; architectures (ditto); and IT’s own organisation.

Second, there’s IT as a part of the business. This is about understanding (at least), and being part of (if at all possible), the business strategic discussions about M&A in general (is this something we do?) and about particular ventures (what about this one?). In many organisations, IT still has to argue its place to this table. An important part of this can be IT’s skills leadership: project leadership, benefits realisation and process knowledge can be significant.

And third, there is IT as facilitator of the business. If infrastructure is IT’s internal concern, this area is about business applications and (see above!) business process understanding.

2 – timeline

A merger or acquisition has four stages.

Normal times – nothing specific on the horizon, but are you set up to accommodate mergers, acquisitions and divestments? Let’s call this MAD thinking. In IT, this might encompass the way you do infrastructure and applications architectures: especially if you’re a conglomerate that trades businesses (think Hanson?) or a company that buys smart start-ups for their intellectual property (pharma again, or IT itself).

Preparation – planning for a particular acquisition or merger, either before or after a deal has been proposed and/or done. Due diligence comes to the fore here: is IT involved? But also, business as usual has to be maintained and possibly with depleted resources: key people will be diverted into the preparation process. IT needs to be on the ball with likely costs of the merger, realistic possible synergy savings, and its own resourcing issues.

During the active phase, things happen fast. The first requirement is for some form of instant integration: shared collaborative spaces, unified email on a new domain (even if it’s a fix-up), shared data between different business platforms and perhaps resolving different data models. Of course, business as usual has to go on: IT may be in the forefront here of keeping normal interactions going.

And of course: IT is undertaking its own merger, probably between two disparate pre-existing organisations. To state the obvious: this has to be resourced and managed too. Both parties’ IT inventories have to be brought together, to realise short term synergies and to begin the  longer term planning. The problem is not to let this consume all the resources so that the other aspects (IT as part of the business, and IT facilitating business) get shunted to the side.

Post-merger, activity doesn’t stop. The organisation and business processes may appear settled, but the longer term decisions are only just beginning: particularly around infrastructure and applications. In an unequal acquisition, the decision may just be to move everything onto the acquirer’s infrastructure and the migration of data and users is pretty much done during the active phase. Otherwise, decisions are slower and more considered: determine an architecture, and then either pick the best of what you’ve got in the combined organisation, or take the opportunity to make a significant change for the better.

Then, in most big mergers, there’s a second round of reorganisation around a year downstream. Some people decide they don’t fit, and leave. Some parts of the organisation weren’t right, or were only right in the short term. Business itself may prove to be more, less, or different than what was expected, since the creation of a new and larger player changes the market place. IT, along with the rest of the enterprise, must expect this and be ready to respond.

And: there are lessons to be learned. Will these be captured? Will the new normal include new ways of being prepared for next time, with better MAD thinking?

I haven’t drawn the picture, but you’ll realise this is a 3×5 matrix: three aspects of IT’s involvement, with key issues and a four stage timeline in each. I’d be interested  in what anyone thinks; and particularly interested if you know of substantial analyst coverage of this area, touching all aspects and stages, from any of the major insight service providers.

Only one Link:
• Make or Break: The critical role of IT in post-merger integration, A T Kearney, April 2010


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