CIOs More Important Than Ever for Success in M&A

Business and Technology Insights

CIOs More Important Than Ever for Success in M&A

 
June 15, 2020

Every merger or acquisition (M&A) has its ups and downs. But one consistent challenge, no matter what the business situation, is effectively and efficiently integrating information technology (IT) and the operations it enables. One key factor is that most companies do not involve IT leadership at the beginning of a deal, even in today’s digital age. Considering 25% of integration efforts typically involve or come from IT teams, and more than half of all synergy-relevant integration activities are strongly dependent on IT, the early and continuous involvement of the CIO and her key leaders are critical to M&A success.

Three Risks of Overlooking IT

With proper evaluation, planning, and execution, M&As can be a major catalyst for growth and rejuvenation. However, companies attempting transformation through M&A must carefully consider the technology capabilities and resources required to realize the goals of the transaction. Three major risks commonly emerge when the CIO is not involved from the beginning of the M&A lifecycle:

1. Missed value opportunities: CIOs and their leaders are uniquely equipped to imagine the ‘what could be’ in terms of a more intelligent, automated, and on the cloud operating model and IT environment, delighting customers and shareholders alike. This re-imagination should start as early as target assessment, evolving during due diligence, and solidifying during Day 1 and beyond preparation.

With IT spending being one of the largest categories of costs for an enterprise today, identifying possible technology-driven synergies sooner rather than later allows for better preparation to manifest the value gains. In today’s marketplace of rapid change, capturing synergies within the first 12 to 18 months after Day 1 should be the goal, as beyond that point they become more difficult to fulfill.

2. Prolonged integration timelines: During an M&A event, the dependence on IT intensifies as teams, processes, and systems are required to merge and take new shape, all the while maintaining ‘business as usual’. Developing an integration plan and timeline without first consulting IT on the resources required to execute the plan will almost always require teams to backtrack. Further, it can delay individual departments’ integration plans and create a domino effect impacting all aspects of the business – design and development, manufacturing, customer support, service delivery, and more.

CIOs, their leaders, and external partners are the most knowledgeable in the ‘art of the possible’ in terms of the technologies available to expedite assessing, planning, and executing the post-merger integration and business transformation. Involving IT only later in the M&A lifecycle can cause unnecessary effort and lose time.

3. Avoidable disruption to daily operations: ‘Business as usual’ can be easily threatened during the M&A process due to factors ranging from technology complexities and insufficient security infrastructure planning to employee flight risk and lack of trust in leadership. Collaboration across the C-suite, including the CIO, as well as consistent and transparent communication can prevent or reduce potential downtimes and missteps due to system updates and cut-overs, ensuring a positive experience for both customers and employees.

Involvement of IT leadership from the beginning allows spotting warning signals and preventing common mistakes such as licensing violations. Misalignment in people, processes, applications, architecture, and infrastructure also can be avoided relative to implementing the target operating model needed to realize the strategic goals of the M&A event.

Putting IT in C-suITe

Early strategic planning and ongoing collaboration with the CIO and IT leadership teams along the entire M&A lifecycle has become mandatory for success in the Business 4.0TM world. Because of our reliance on technology and systems for business-critical operations such as customer-facing services, operational and accounting processes, IT-enabled offerings, and more, leaving IT executives out of the process increases the chance for missed value opportunities, drawn-out timelines, and suboptimal business performance. In contrast, involving the CIO and team at every phase in the M&A process can help ensure greater synergy realization, innovation, and competitive sustainability by striking the right balance between having enough technology to maintain an advantage over competitors but not so much that the ability to do new things is constrained.

Randy Mabie is the global leader of TCS’ M&A Services, applying over 25 years of professional services, enterprise software, and IT operations experience. With a focus on the business advisory discipline, Randy supports executives and leads teams in the delivery of the full value chain of strategic planning, design, and implementation of transformation programs, including TCS’ end-to-end M&A Business-in-a-Box solution for completing M&A integrations and divestitures faster and with less risk.

 

Courtney Wood leads thought leadership development for TCS’ M&A Services. Courtney has spent over 25 years in management consulting, supporting both large and early stage enterprises in producing meaningful outcomes by developing the right business strategies as well as aligned ‘people, process, and technology’ constructs and roadmaps to realize their transformational goals. Prior to consulting, Courtney spent four years in commercial lending and investment banking, as well as earned an MBA from Columbia Business School.