Putting IT At The Heart Of Your M&A

Joseph Msays

Today, many firms are exploring merger and acquisition (M&A) opportunities to help them adapt and thrive in a business world defined by vertical integration, market consolidation, margin expansion, and digital reinvention. According to the KPMG M&A Predictor Report, almost 40,000 deals were completed in 2017 alone; early results indicate there will be even more in 2018.

Most organizations realize going in that change management and HR are important to achieving M&A goals, yet fail to consider the importance of rapidly integrating, splitting, and transforming IT systems. When done properly, IT can enable the post-M&A organization and drive quicker realization of the M&A business case. When merged organizations fail to integrate IT, they’ll end up running multiple platforms and landscapes concurrently, with all the cost and complexity that arrangement inevitably creates.

The failure to transform IT and make it a competitive differentiator is one of the main reasons merged or split entities find it difficult to fend off nimble, digitally driven market entrants. In contrast, companies that make IT a central focus of their M&A deals put themselves in a better position to cut costs, limit complexity, and quickly pursue important economic opportunities, such as new M&A deals. That IT focus involves integrating and harmonizing systems, creating new platforms, and transforming processes entirely or selectively.

Benefits of putting IT at the heart of M&A

According to the IBM Global C-Suite Study, “Reinventors” are significantly more likely to have an IT strategy aligned with their business strategy and processes optimized to support that strategy. These are organizations that consistently outperform their peers across revenue growth, profitability, and innovation. It’s no surprise that this same group was also more likely to report feeling confident about their ability to adapt to change, manage disruption, and pursue digital reinvention.

With this in mind, one would expect IT to be a key area of focus for any company engaged in an integration or spinoff. However, this often isn’t the case. The PwC M&A Integration Survey found that 35% percent of respondents failed to fully integrate their IT systems and processes after their last deal. Even merged IT services companies, which typically pride themselves on their ability to optimize and align IT systems and processes for their clients, often go months or years without fully aligning systems like labor claiming, billing, purchasing, and customer feedback to their business priorities.

Time is of the essence for many mergers and divestitures, since organizations often wait many months to receive regulatory approval to go ahead with their deals. Working to align IT with the post-M&A business strategy from day one can help organizations move quickly to make up for lost time after the approval finally goes through. IT speed and agility can also help the new entities remain flexible to competitive dynamics. They are better-positioned to take advantage of unexpected opportunities to further simplify business processes, drive higher synergy, remove legacy inhibitors, and tap new revenue streams that would not have been possible before.

How to achieve IT alignment and optimization

To put IT at the heart of their business strategy post-M&A, companies need robust talent, industry skills and best practices, powerful capabilities, and continuous innovation. For example, in midsize and large enterprises, real-time data must be shared back and forth between the digital core system and interfacing systems—such as CRM, HR, finance, and supply chain—to meet or exceed business plans and strategic imperatives. This allows the organization to uncover timely insights that support informed decision-making and rapid reinvention. As a result, IT can serve as a key driver of business value, while also helping merged entities gain agility and flexibility, or spin off new entities that can hit the ground running with rapid and differentiated execution.

For very large M&A deals that can take years to complete, organizations must understand that aligning and transforming IT is not a one-time event; they must make a long-term commitment to ensure that their IT organization is always ready to adapt to change. For example, two companies may need to combine their IT systems and business processes quickly in the aftermath of a mega-merger, only to split them again when an opportunity for offspring companies presents itself. In short, successful companies make IT transformation and optimization a way of life, regardless of whether or not they have an M&A deal on the horizon.

To put it from another perspective, when executing an acquisition, leaders must determine whether it makes sense to move the smaller company’s HR system into the larger company’s legacy HR system or to stand up a new cloud-based HR system for the smaller company and move to the larger company later on. The same holds true for CRM, supply chain, and other systems.

Since it serves as the single source of truth for the entire organization, the enterprise-wide digital core system will be the hardest of these systems to tackle. Further complicating the issue, many companies need to migrate, integrate, and transform their core legacy systems into a single digital one while simultaneously reinventing the interfacing systems to compete in the digital era.

The good news is there are many automation tools and platforms available to help accomplish these tasks. For example, there are proven methods to quickly merge financial entities by leveraging innovations from enterprise cloud application providers. These proven methods are supported by automation tools that scan and visualize, selectively identify which processes need to change, conduct targeted testing, deploy globally and rapidly, and perform continuous improvement and support.

Learn more

If you’re looking to transform your IT to support your M&A activities, IBM can help. To get started, learn which adoption approach you should take to target your digital core.

Also, visit our IBM Services for SAP S/4HANA page to learn more about how we can help you modernize business processes and pursue your M&A business case.


Joseph Msays

About Joseph Msays

Joseph Msays is an experienced IBM global executive, currently serving as Vice President and Global Managing Partner for NextGen Enterprise Cloud Applications Center of Excellence. In this role, he is pioneering new ways of engaging CxOs in their digital reinvention agendas, and building and migrating new cloud-based business applications. Joseph has experience managing many IBM professional services units and large strategic systems integration and outsourcing relationships, and has lived and worked in virtually every major market across the globe.