Banking

Mergers: The time for CIOs to show how good they really are

M&A integration puts pressure on IT but it's also their time to shine

Mergers are a "powerful opportunity" for CIOs to show the value of the IT department - but tech chiefs need to develop new skills if they are to seize the advantage, analysts believe.

Around 25 per cent of the effort involved in a typical merger or acquisition integration will come from the IT team, and with M&A activity likely to rise as the economy improves, CIOs need to develop their integration capabilities now as conventional leadership and management techniques are often not up to the task, according to analyst house Gartner.

Dave Aron, vice president at Gartner, said reaping the benefits of a merger or acquisition is a "notoriously tricky business" thanks to the lack of established governance coupled with aggressive goals and timeframes, and the inevitable surprises along the way.

The process is made all the harder by the fact the business must continue to serve clients and run operations in the face of the disruptive integration activity, making IT's role critical, he said.

However, the complexity of M&A means that, in organisations where IT traditionally has strong project and service-management skills, there is an opportunity for the tech team to play a larger role in the integration.

Aron said in a statement that mergers "present a powerful opportunity to demonstrate the capabilities and business value of IT, and to stretch the performance of IT team members. While successful M&A integration does not rely exclusively on the CIO and IT, they bear a large part of the burden, since integrating people, operations, information and processes requires significant technology investments".

Mergers and acquisitions can give the CIO a chance to shine

Mergers and acquisitions can give the CIO a chance to shine
(Photo credit: Shutterstock)

The analyst group said IT plays a role in five different M&A integration phases:

  • The due diligence phase This is when a basic plan of action is sketched out. Gartner said in the most successful integrations, integration planning happens concurrently with due diligence and data gathering, and warned the idea integrations must be conducted quickly "is a myth". While planning and communication should be conducted as quickly as possible, according to the analyst, the speed of integration depends on the context and goals.
  • The welcome phase Here a few visible changes are made to signal the creation of the new organisation. IT's role may include providing standardised email addresses, phone accounts and security badges.
  • The initial/commercial phase This is when "urgent practical changes" are instituted. This initial phase of the actual integration addresses urgently needed outcomes, with common activities include dealing with legal and regulatory issues and achieving transparency through integration of financial and management information.
  • The main integration phase Here most of the big process and system changes are made, and the phase may mean bringing one company onto the IT platform of the other.
  • The reap-the-benefits phase This final phase is where benefits such as cost saving or market-share boost are enjoyed - but this phase can also provide learnings for subsequent M&A situations.

Gartner research director Mary Mesaglio said the time and effort that each phase requires from IT varies significantly: for example, a large amount of IT resources is typically needed for a relatively short time in the initial/commercial phase, whereas a smaller - but still substantial - IT effort is needed over a longer period in the main integration and reap-the-benefits phases.

About Steve Ranger

Steve Ranger is the UK editor of TechRepublic, and has been writing about the impact of technology on people, business and culture for more than a decade. Before joining TechRepublic he was the editor of silicon.com.

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