mergers & acquisitions it implications
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IT Implications in Mergers & AcquistionsTRANSCRIPT
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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
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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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* From “The Role of Information Technology in Mergers and Acquisitions”, by Peter Blatman, et al. Deloitte Consulting
• Picking the right model for integrationStrategy
• Getting the right information early in the processDue Diligence
• Effectively implementing the merger / acquisition, including anticipation of costs
• Picking the right teamExecution
• Aligning systems and processesPost Merger Integration
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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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Goals:
• Expertise of seller
• Access to newer markets
Maintain
Strategy: Keep status quo
operations for both companies
Goals:
• Access to newer markets
• Access to newer distribution channels
Synthesize
Strategy: Choose best
technologies & processes from
each company
Goals:
• Cost reduction
• Market expansion
Consolidate
Strategy: Adopt technology &
processes of acquiring company
Goals:
• New business vision &
processes
Transform
Strategy: Develop a new IT vision
and organize as per vision
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Establish single procurement
function
Consolidate hardware,
software, storage
Sales and marketing
Production
Supplier management
systems
Cost reduction by eliminating
duplicate IT functions
Standardize operations (e.g.,
IT support, maintenance)
Shared Overhead
Integrate customer data,
discover new revenue sources
Streamline work-flow
Cost reduction
Market expansion
New markets
Systems Integration
Economies of Scale
M&A SuccessExchange of information
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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
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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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Set / review strategy
Create / update integration strategy
detailed plan
Perform due diligence
Execute communications
plan
Set measureable targets & goals
• Involve IT early
• Identify objectives for M&A
• What are expected benefits?
How achieved?
• Form integration team
• Create & socialize white
papers on strategy
• Create communications plan
• Create PMO
• Honest appraisal
• Identify possible land mines
• Document & report issues,
rework strategy
• Identify stakeholders
• Plan for all levels of organization
• Document & report issues, rework
plan
• What are measures of success?
• How measured?
• What happens if not met?
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Staffing implications – critical to successCommunication planning
Cultural considerations
Training
Retention of key technical talent critical to success
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Privacy and securityRegulatory 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
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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
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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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StrategyDue
DiligenceIntegration
PlanningExecution
Define
integration
and IT
strategies
Set targets &
measures
Create
integration team
Assess risks &
synergies
Estimate costs
Establish project
management
office (PMO)
Choose
approach
Develop work
plans and
metrics
Implement
work plans
Check against
metrics
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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
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Oracle and Symantec
Oracle : 27 acquisitions since Dec. 2006Penetrating 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. 2001Complementary products to expand the market for information security
Includes Altiris and PC tools for IT management
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Google : 63 acquisitions since 2001Expanding 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. [email protected].
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
Uttiya Dasgupta, Director of Technology
Don Keysser, Director of Finance