Preparation by IT vital for successful mergers

IT plays an essential role in takeovers and must be involved

The dismal economy has made many companies ripe for takeovers, so it's important for IT managers and CIOs to be prepared in case their company is involved in a merger, a specialist warns.

At least 100 mergers and acquisitions have been announced since the start of 2009, according to data from Thomson Investors Network.

That means IT executives must heighten their preparedness for such transactions, says Fred Cohen, group vice president and head of the global asset management practice at IT services company Patni Computer Systems.

In general, "more of the M&A [related] decisions are made on the business side, and there's not a very deep dive on the IT side," says Cohen.

Mergers and acquisitions have long had two main goals: gaining customers and market share, and improving efficiency, says Cohen, whose division at Patni focuses on financial services organisations.

"In the new world, a lot of M&A activity has resulted from emergency mergers, trying to save institutions, or fire sales of assets, which means even less due diligence [on IT] has been done," he says.

The time between when a deal is announced and closed can be problematic, since companies are still working as separate entities and potentially competitors, he says. "Because the deal hasn't been closed yet, you really don't want to expose all your internals and secrets to the other side."

And meanwhile, ongoing IT projects during this time "become suspect" in the eyes of company workers, Cohen says. "People say, should I keep going, or should we just throw it away? You go to meetings and you've got the whole project team saying, 'Why should we do this? They're just going to throw it away."

It is crucial to make sure IT staff members with the deepest knowledge are made to feel secure once a deal is announced, to ensure they stay with the company, he says. "It's about identifying who's important and making sure they understand they're important. ... You can't lose the talent that knows the system. A lot of [customisations] are undocumented, and they're everywhere."

In Cohen's experience, companies generally do this, but "they do it too late. ... [Key workers] don't get it communicated quickly enough that someone is going to motivate them to stay."

Clients also need to be reassured, especially those who receive data transmissions from the merger target on an ongoing basis, he says. CIOs should design a data "abstraction layer" around internal systems to ensure a smooth transition in case of a merger or acquisition, he says.

Once the deal is done, and it is time for decisions to be made about what stays and what goes, it's important to adopt an attitude of cooperation, particularly if your company is the deal's dominant player, according to Cohen.

"The goal is not to take everything from one side and move it to the other, it's to create something better from the parts," he says. "Even if you're much better, don't go in there with the attitude that you're the conqueror. It doesn't foster cooperation and the results usually suffer," Cohen says.

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