Mergers & Acquisitions It Implications

Expansion into new markets
Build revenue and market position
Acquire expertise
Create synergies and efficiencies:
Shared overhead – cost reduction
Economies of scale
Sharing data (e.g., clients, markets) across the
organizations

Copyright 2010 AvaSea Services – All Rights Reserved
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Estimate that between 50% - 70% of M&As fail
Reasons for failure:
Cultural differences
Lack of transition planning
Difficulties integrating IT between organizations
Unexpected problems and complications
Up to 50% of integration costs can be incurred
by IT

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Strategy • Picking the right model for integration

Due Diligence • Getting the right information early in the process

• Effectively implementing the merger / acquisition,
Execution including anticipation of costs
• Picking the right team

Post Merger • Aligning systems and processes
Integration

* From “The Role of Information Technology in Mergers and Acquisitions”, by Peter Blatman, et al. Deloitte Consulting

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Successful strategies include:
Early involvement of IT
Careful due diligence early in process – need to
assess IT landscape of both companies to identify
land mines
Careful attention to budget – it is almost always
more complicated and costly than anticipated
Too often, early planning:
Focuses on front-office (product management,
sales, marketing) and
Neglects back-office functions (HR, IT, operations)

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Maintain Consolidate
Goals: Goals:
• Expertise of seller • Cost reduction
• Access to newer markets • Market expansion
Strategy: Keep status quo Strategy: Adopt technology &
operations for both companies processes of acquiring company

Synthesize Transform
Goals: Goals:
• Access to newer markets
• Access to newer distribution channels
• New business vision &
processes
Strategy: Choose best Strategy: Develop a new IT vision
technologies & processes from and organize as per vision
each company

6

Economies of Scale
Shared Overhead  Establish single procurement
 Cost reduction by eliminating function
duplicate IT functions  Consolidate hardware,

 Standardize operations (e.g., software, storage
IT support, maintenance)

Exchange of information M&A Success Systems Integration
 Integrate customer data,  Cost reduction  Sales and marketing
discover new revenue sources  Market expansion  Production

 Streamline work-flow  New markets  Supplier management
systems

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Incompatible information systems and data
repositories
Divergent management philosophies
Incongruent management practices
IT systems that are not compatible and require
large investments of time and $$$ to merge
Difficult decisions to be made:
Staff retention (or not)
Legacy applications / systems – keep or not?

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Lost revenue through poor execution
Need to “keep the lights on” – conduct business
as usual, while moving forward with transition
Potential customer service issues with poorly
executed transitions
Data migration and security issues
Adequate time for testing and QA activities
under pressure from business to make merger
deadlines

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Management of existing contracts – potentially
a huge project (multi-year)
Software / hardware license and lease contracts
Telecommunications
Outsourced services
All contracts must be reviewed for:
Term (how much time left)
Termination clauses and penalties
Determination whether to continue or terminate,
or modify terms

10

IT system integration is a mature discipline –
most large IT organizations are experienced
with integration projects
IT in M&A projects:
Require the same project / transition management
disciplines on a larger scale
Are frequently rushed and lack adequate planning
Have an added complexity of cultural differences
between the companies

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Need clear statement from senior leadership
about how business will deliver value through IT
Set goals and priorities – can’t do everything at
once – what is the vision?
Create roadmap of enterprise architecture and
plan for achieving end state
Communications planning
Shared services – what can be shared?
HR/finance/ERP/support?

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• Involve IT early
Set / review • Identify objectives for M&A
• What are expected benefits?
• What are measures of success?
strategy How achieved?
• How measured?
• What happens if not met?

Create / update
Set measureable
targets & goals
integration strategy
detailed plan
• Form integration team
• Create & socialize white
papers on strategy
• Create communications plan
Execute • Create PMO
communications
plan
Perform due • Honest appraisal
• Identify stakeholders diligence • Identify possible land mines
• Plan for all levels of organization • Document & report issues,
• Document & report issues, rework rework strategy
plan

2010 AvaSea Services – All Rights Reserved

Staffing implications – critical to success
Communication planning
Cultural considerations
Training
Retention of key technical talent critical to success

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Privacy and security
Regulatory requirements might be different in different
companies – particularly important for health and financial
services
Paramount importance to protect corporate data
Data types may be incompatible between companies,
requiring careful planning for merging
Regulations include:
Markets in Financial Instruments (MiFID)
Sarbanes-Oxley (SOX)
Payment Card Industry Data Security Standard (PCI DSS) –
related to retail

15

CIO (IT) involvement early in merger planning
activities
Priority on thorough and detailed transition
planning: requires project management and
technical expertise
Communications planning
Early due diligence to identify majority of
pitfalls – ideally done prior to signing M&A
agreement

16

Merge systems? Migrate to one or the other?
How compatible are the business processes that
support and use the systems?
What is role of outsourcing (or consultants) in:
Current operations of each company
Transition / project management
Future operations?
Outsourcing contracts may have large impact on
M&A plans

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What are your metrics for success?
How will you know if you have achieved your
vision? Examples of metrics:
System cutovers without downtime
Customer satisfaction measures
Quality of data in combined systems, protection of
data security
System uptimes
Business processes continuing without interruption

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Due Integration
Strategy Execution
Diligence Planning

Define Create Choose
integration team Implement
integration approach work plans
and IT Assess risks & Develop work Check against
strategies synergies plans and metrics
Set targets & Estimate costs metrics
measures
Establish project
management
office (PMO)

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SAS Acquires IDeaS
SAS Institute: Leading data analytics co. ~2B$
Acquired IDeaS (MN) in 3Q 2008 co. ~ 20M$+
Expand current product offerings by using decision
systems technology from seller
Maintained existing product lines while exploring
synergies

20

Oracle and Symantec
Oracle : 27 acquisitions since Dec. 2006
Penetrating new markets, innovating through
synthesis of new products and services
Including Stellent Inc. from Minnesota
Ran into issues (e.g., PeopleSoft acquisition)
Symantec Inc.: 40+ acquisitions since Jan. 2001
Complementary products to expand the market for
information security
Includes Altiris and PC tools for IT management

21

Google
Google : 63 acquisitions since 2001
Expanding technology reach both online & mobile
Includes Android – popular in Smart Phones market
Includes Double Click – used in Ad Sense

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Mergers and Acquisitions: The Business Risks Associated with Merging IT.
Mark Bargh, VP of AppLabs, 2007.
Plugging IT into the Merger Equation. InfoWorld, April 24, 2000.
Information Technology’s M&A Problem: A Briefing on Integration during
Mergers & Acquisitions. Shawn Torkelson, Synapse SE. Information@synapse-
se.com.
The Role of Information Technology in Mergers and Acquisitions. Peter
Blatman, Principal, et al. Deloitte Consulting LLP. 2008, Deloitte Development
LLC.
How to Manage Mergers and Acquisitions. Stephanie Davidson, IT World-An
Open Exchange. April 5, 2001.

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Experience driving results
IT operations and transformation expertise
Our specialties include:
IT operations management, operations
assessments
Introduction of new computing technologies, such
as Software-as-a-Service (SaaS), cloud computing
Sourcing – insourcing and outsourcing
Vendor and contract management
IT financial analysis

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Our leadership team
Linda Langin, Principal
612.756.3685
llangin@avasea.com

Uttiya Dasgupta, Director of Technology
651.204.3134
udasgupta@avasea.com

Don Keysser, Director of Finance
612.710.0995
dkeysser@avavsea.com

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Mergers & Acquisitions It Implications

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