M&As from the IT Integration Perspective
Mergers and acquisitions are common, but problems with IT integration can doom their success. Many companies fail to evaluate systems, platforms, and hardware ahead of time, which can lead to expensive and time-consuming problems later. Leaders need a complete view of the IT ecosystem of each business to make smart decisions. Steps to take:
- Do a full audit of each company’s IT assets
- Talk to employees about decision-making processes and usage related to technology
- Look closely at all service-level agreements and contracts
- Evaluate how IT has supported business goals
- Examine processes and resources for IT support
- Pinpoint potential security gaps
- Consider potential compliance issues
Research shows that between 70% to 90% of acquisitions fail. The causes can be complex, but merging two different information technology systems is a major challenge that can certainly contribute to the failure of M&As—or their success. Knowing what to evaluate, how to plan, and some best practices for approaching IT integration—especially in an environment of ongoing digital transformation—are crucial when even considering a merger or acquisition.
If an M&A is a possibility in your business’ future, here’s a breakdown of how to approach it from an IT perspective that can help prevent problems down the road.
- Conduct a complete IT audit. It might seem obvious, but before you can make any decisions, you need to do a total analysis of each company’s entire IT ecosystem—physical hardware like servers, networking equipment and computers (including brands, makes and models); applications; platforms; and other services. This will also help with evaluating existing assets, their age and value, and the potential cost of upgrading or replacing them. For any proprietary software, identify who is responsible for supporting it.
- Talk to employees about IT integration. Thorough interviews and questionnaires with the IT team as well as key decision-makers and selected users are essential for understanding the complete technology landscape.
- Assess service-level agreements. Look at contract terms with vendors, including length and the costs associated with early termination, as well as fees for adding users or equipment. Note also that software licenses may not be transferable from one company to another even in the case of a merger or acquisition.
- Consider business goals. IT systems support growth and efficiency—so businesses are often in the middle of projects to add, expand or retire infrastructure and services. Knowing what those projects are, even if they haven’t been implemented or will become irrelevant, can help business leaders understand the reasons behind IT decisions.
- Look into the details of IT support. How are end users at each company supported? Are IT services in-house or through a third party, and why? If the team is in-house, what is the hierarchy, and where are employees located? Are there physical offices that need support? How and how quickly are employees used to accessing support, and how will changes to that affect their ability to do their work?
- Identify potential security concerns for your IT integration. Businesses that are in trouble or growing quickly often lack resources for sufficient cybersecurity measures—making them vulnerable to hacking and other threats. When buying such companies, it’s vital to make sure there is security in place to protect the investment.
- Evaluate the impact of compliance standards. Applying higher compliance standards to an acquired company can have unexpected effects on workflows, sowing confusion and frustration. In addition, new compliance standards may impact existing agreements with customers. For example, beefing up security standards may mean employees can no longer use internal applications to communicate with external parties or install programs they need without prior authorization. Alternatively, a firm that merges with or acquires a company that is not compliant with the same standards (such as NIST certification for cybersecurity) may violate contractual terms with its original clients.
Following Through with IT Integration
Once due diligence has been completed along the lines outlined above, the information gathered will help point to whether the best solution is to choose one company’s set of systems, a combination of both or to keep them separate. Any IT integration should also be deployed over time using change management processes to train employees trained on new tools and help them adjust to their new technology environment.
Integrating IT during a merger or acquisition is a huge project that requires detailed planning and careful execution. At Handled, we have successfully guided businesses through integrations and other challenges. Connect with us for help with integration or other IT needs.