transcending enterprise boundaries: it consolidation in an m&a deal, by salil agrawal, director,...
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Consulting Delivering Deal Value
IT consolidation in an M&A deal17 Sep 2010
HCL Connect 2010
Transcending the enterprise boundaries
PwC
Importance of IT in M&A
Role of IT along the deal cycle
The role of the CIO
Contents
A survey of 100 CEO’s*, threw up the following interesting facts:
• More than half (58%) of CEO’s interviewed did not measure or use tools to control
integration costs.
• Half the CEOs affirm that in their next acquisition they will give added attention to the
management of the expectations of employees and to the planning of operational
integration (processes, people and IT).
• The CEO’s most commonly mentioned the high costs in IT integration
IT and successful execution of deal
Importance of IT in M&A
PricewaterhouseCoopers
• The CEO’s most commonly mentioned the high costs in IT integration
The CEO’s also pointed out that:
• Uncontrolled priorities exist between critical and non-critical IT investments
• They tend to ignore IT associated risks and expenditure
• Management software (e.g. ERP) is not aligned to meet the needs of changes
arising from the merger
* PwC conducted an International survey amongst 100 CEO’s involved in deals
Slide 3September 2010Role of CIO in M&A
Research consistently shows that integrating information systems is one of
the top integration challenges for sizeable transactions.
Implications of IT on a merger or acquisition
• IT involves the highest volume of activity over
the longest period of time.
• This volume alone increases complexity
of integration
• Complexity is increased by the
• IT involvement in the early stages of a deal
helps identify the magnitude of integration
challenges
• IT represents between 30 to 50% of total
merger synergies
Importance of IT in M&A
PricewaterhouseCoopersSeptember 2010Role of CIO in M&A
Slide 4
• Complexity is increased by the
enormous dependencies which IT has
on other functions to execute its plans.
• IT plays a key role in determining the level of
integration complexity in a merger
merger synergies
• IT usually determines the overall total time
span of the merger
• Post-merger IT integration is the highest
operational risk of the merger
• Loss of key IT staff is an important people
risk
IT plays a key role along the deal continuum
Validate
strategy
Assess
options
Evaluate
deal
Negotiate &
close
Integrate
acquisition
Capture
value
Manage your processDefine your purpose
Pre deal Post
Role of IT in M&A
PricewaterhouseCoopers
Pre deal
IT due
diligence
Post
merger
integration
Better
valuation
Speed
and value
Deliver
synergy
Slide 5September 2010Role of CIO in M&A
Role IT can play to make a deal successful
Critical success factors for a
successful deal
Role of IT
Early participation Pre-deal IT due diligence
Identification of key IT risks, costs ,synergies and issues
Fast identification of near term
opportunity areas
Identify synergies and how IT can act as an enabler
Align IT plans & Identify IT cost saving opportunities
Role of IT in M&A
PricewaterhouseCoopers
opportunity areas Align IT plans & Identify IT cost saving opportunities
Ensuring MIS and other reporting
mechanisms are ready
Day 1 IT work stream initiatives and planning
IT and Finance dependencies and assign ownerships
Integration Planning IT Integration Roadmap, Key IT deliverables
Business Continuity Planning BCP and Disaster Recovery Planning during the
transition and future stage
Risk Exposure and Warranties IT Risk identification, prioritization and mitigation plans
Slide 6September 2010Role of CIO in M&A
Key IT challenges in an M&A scenario
• Each entity brings its own set of applications and technology and complexities
• This leads to additive costs and geometrical increase in complexity
Duplicate application systems and infrastructure
• Increase in number of operating locations to be managed
• Different processes, policies and practices for running of operations
Two distinct IT organizations with different operating methods
Role of IT in M&A
PricewaterhouseCoopers
• Different processes, policies and practices for running of operations
• IT management aims for completion of integration projects & achieving operational stability
• Business management looks for revenue and profitability synergies
• Common vision of the combined company and a common agenda is usually missing
IT and business have different criteria for success
• IT’s workload mushrooms during due diligence and grows after the deal’s close, until systems integration or transition is complete and old systems are shut down.
IT’s integration tasks go on long after the deal is closed
Slide 7September 2010Role of CIO in M&A
Role of CIO in M&A integration
• Obtain a seat on the pre-deal
team
• Understand deal’s business
intent
• Ensuring IT has the skills &
structure to manage an
• Assess acquired company’s IT
assets and develop an
integration strategy.
• Define the decision-making
structure and fill key
organizational positions
• Establish connectivity &
consolidate key infrastructure
aspects
• Revalidate due diligence
assessments
• Begin vendor agreement
Due diligence Post M&ABefore M&A
Deal Phases
Where does CIO fits in
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structure to manage an
integration project
• Developing M&A integration
principles and templates for due
diligence and planning
organizational positions
• Pull together the integration
project team
• Begin vendor agreement
consolidation
• Complete any needed data
migrations & system integrations
• Plan critical milestones to the
lowest level of detail
• Define & validate post merger
goals, strategies & plans
• Complete business process &
system improvement
• Retire ‘ low hanging’ redundant
systems
Slide 8September 2010Role of CIO in M&A
• Strong influencing, networking and negotiation skills to influence key deal decisions
• Robust understanding of business and cross functional areas like finance, marketing,
sales, HR ,operations and supply chain
• High-level, organizational decision-making to take key IT decisions influencing the
deal
Skillsets required for a CIO in M&A situation
Where does CIO fits in
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• Strong finance skills to validate business case and prioritize initiatives
• Strong people and cross-cultural skills to deal with cultural and people integration
issues and motivate staff
• Strong program management and integration skillsets to achieve speed and desired
synergies
• Robust understanding of technology (applications, infrastructure and process) and
how IT acts an enabler for business strategy
Slide 9September 2010Role of CIO in M&A
Thank you
Salil Agrawal
Phone: +91 124 4620552
Mobile: +91 9810064535
E-mail: [email protected]
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