The role of IT in the M&A process

The role of IT in the M&A process
Steve Anderson Dip Mgmt MCMI FIMIS FBCS CITP
Agenda
• Mergers vs. Acquisitions
• Involvement of the IT team
• People implications
• On the hunt – Micro Warehouse Inc.
• Breaking up – Citex Group Ltd.
• Common issues
• Summary
Definitions
• A Merger
“The joining of two companies”
“Two or more companies combined to achieve greater
efficiencies of scale and productivity. This is accomplished
through the elimination of duplicated plant, equipment, and
staff, and the reallocation of capital assets to increase sales
and profits in the enlarged company.”
“The absorption of one corporation by another.”
• An Acquisition
“Acquiring control of one corporation by another.”
“One company taking control of another by purchasing a
majority or all of the target company's outstanding shares.”
“The act of one company taking over controlling interest in
another company.”
Mergers vs. Acquisitions
• What’s the difference?
• Mergers = absorption & elimination
• Acquisitions = control & ownership
• Strategic, opportunistic or necessity?
• The people perspective
• “It’s a merger…”
• “It’s an acquisition…”
• Increasing risks – increased security
• Speed is of the essence
The role of the IT team
• It depends…
• Business support function?
• IT integral to product or service?
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A seat at the table
Profile, credibility and experience
Mission-critical IT
Day 1 changes
Domains and emails
Full integration
Steps in the process and IT involvement
Strategy
Cost
Audit
Assets
D-DAY
High Level Low Level
Impact on the IT team
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MERGER
Usually negative
Less involvement
Low control
Low morale
Low risk
Low job security
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ACQUISITION
Usually positive
More involvement
High control
High morale
High risk
High job security
Example: Micro Warehouse Inc.
• $1.7bn global mail-order computer and
peripheral reseller
• Expanding rapidly throughout Europe by
acquisition
• Dedicated European IT team established
• Small amount of due diligence beforehand
• Implemented global standard sales order
system, email and data networks
• Migrated all SKUs and customer data across
along with manual data entry
• Localised system for country accounting
rules
Example: Citex Managed Services Ltd
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£120m managed services business
Merged with Carillion plc
Involved early in process
Placement options for key staff
Led transition planning – collaboration
Flawless execution and migration – domains,
email, servers, data
• After-shock and fallout
• Close the door
Common Issues
• Lack of senior management
understanding
• Lack of visibility
• IT involved too late in the process
• Limited valuations
• Impossible timeframes
• Openness and honesty
• Communication is key
• Lost intellectual capital
Summary
• Prepare for a merger or acquisition
• Experience is the best teacher
• Establish a high profile and strong
personal credibility at board level
• Demonstrate leadership
• Support your team
• Appropriate incentives
• Professionalism pays dividends