IT & M&A – A Problem or an Opportunity?
Research Findings
Presented by F. Vielba
BCS Consultancy Group Event
13 June, 2006
1
Agenda
• Key points from the research
• What should CIO’s do when facing an
M&A?
• Future trends
13 June 2006
2
Key Points from the research
• M&A is increasingly a part of CIO life
• IT is more central to the business so the stakes
•
•
•
•
are higher
M&A poses significant technical challenges
M&A calls for well-developed management skills
IT needs to be involved in the M&A process from
the beginning
Because M&A is growing companies need to get
better at learning
13 June 2006
3
M&A Activity over time (last 100 years)
10,000
Illustrative only
Number of Deals
Number of deals
0
1905
1900
2005
TIME
2005
. . . In waves which coincide with economic activity
13 June 2006
4
UK Scene – Cross Border Acquisitions
In £ billions
Source: FT, February 8 2006
180
160
140
120
100
80
60
40
20
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
FOREIGN
UK CO's
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The pitfalls are clearly sign-posted
Lack of
attention to
detail
Vision not clear
or not articulated
Machismo and
hubris provide
the motive force
Lack of
strategic fit
Lack of
sponsorship
Underestimation
of costs
Victor
mentality
Lack of credibility
of implementation
team
Lack of postdeal
acquisition
plan
Flawed
rationale
behind
merger
Lack of
understanding
cultural
sensitivities
Lack of
knowledge of
target prior
Lack of clarity
to deal
in the value
creation logic
Lack of
communication
Focusing only
on the financial
arrangements
13 June 2006
Acquisition
targeting was
haphazard
6
Underestimation
of complexity
of integration
. . . Most of these signs apply to IT
Inadequate
pre-deal
plans
CEO’s whim and
prejudices dictate
need for and pace of
acquisition/merger
BTM Model – Issues Encountered
Company A
Business issues
Decision
to merge
or acquire
Technical issues
Normal
Operation
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Company B
Management issues
IT is more central to the business
Prior M&A experience
M&A strategy
M&A target
M&A decision
IT Strategy within the business
Business
Context
M&A implementation
timetable
Role of IT in the M&A team
Due Diligence
Management of the M&A process
So the stakes are higher….
13 June 2006
Role of IT in the business
8
M&A poses significant technical
challenges
Untested technology
Centralised/decentralised
In-house versus packages
IT
Lack of standard systems
Context
Incompatible technology
Data migration
Interface problems
Scalability
So ensure that your team has the right technical
skills …
13 June 2006
9
M&A calls for well developed
management skills
Retaining key skills
Delivering the IT synergies
Creating a shared vision
Leading the change
Planning and Organizing
Dealing with cultural issues
Management
Context
Selecting the M&A IT team
Managing communications
Dealing with
suppliers/customers
Doing the review process
and learning points
So ensure that you are well equipped for the
journey …
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10
Phase Model
PHASE 1
Due Diligence
PHASE 2
PHASE 3
Detailed
Assessment
Integration
PHASE 4
Review
 I WILL CONCENTRATE ON THE FIRST AND LAST PHASES
 THE OTHER SPEAKERS WILL TALK ABOUT THE MIDDLE TWO
PHASES
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IT needs to be involved from the
beginning
• To provide business continuity
• To estimate the technical risks and costs
• To enable business synergies
• To play an active business role
So ensure that your CEO understands that…
13 June 2006
12
Companies need to get better at
learning
• To avoid costly mistakes
• To beat the competition in a M&A bid
• To be successful
• To avoid disappointments
So ensure that your company has a process
to do that …
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What should CIO’s do?
• Have a clear IT strategy that includes M&A
•
•
•
•
•
•
planning
Get the right technical and management skills
Buy the expertise if you are new in the M&A field
Adopt a structured approach and integrate quickly
Carry out due diligence as soon as you can
Do detailed assessment and planning
Carry out a post-implementation review
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Future Trends
• The role of IT in M&A will grow in importance as
•
•
will the risks and opportunities for CIOs
Companies will adopt a more holistic approach
to M&A and IT will be an integral part of it
CIOs will become more adept at managing
business transformation projects such as M&A
13 June 2006
15
A problem or an Opportunity?
• That depends on the approach
• For well prepared companies IT can
represent an opportunity
• For the “unprepared” IT can be a big
problem
13 June 2006
16
If you want to know more …
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•
•
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13 June 2006
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