Why IT Should Be an M&A Power Player
Scenario: After decades of operating under one model, a company’s strategy changes; the board, the executives and the market forces in a grand alliance decide to shift the operations in a new direction. Will they become, smaller, nimbler, more focused? Or will they expand their reach, conquering new markets or business verticals? Once the decision is made, the strategy is laid out and a roadmap starts to evolve. Throw a buyer or a seller into the mix and we are witnessing the birth of a brand new enterprise!
Merger and acquisition (M&A) or divestiture periods are undoubtedly disruptive and chaotic. Almost all organizations will struggle with the sequence of priorities because people, processes and technology are inextricably intertwined; splitting them apart or rearranging them inevitably causes a breakdown in some part of the value chain. Core operations do not work without people; people do not work without information systems; information systems do not work without technology; and technology does not work without core operations. This cycle is difficult to break, and it makes organizations incredibly hesitant to tweak any part of the process.
However, within this chaos and disruption comes a tremendous opportunity for transformation and bringing IT into the strategy at the beginning will help anchor the strategy in the most relevant data and processes. IT lies at the intersection of the Venn diagram that represents both the old organization and the new; the data remains the same, but systems and processes – once identified – can be refined, updated and streamlined. Business strategy and processes as a whole impact the efficacy of IT, so it makes sense that IT should have a voice and representation at the discussion table. A clear understanding of how information flows through an organization will mitigate problems – ranging from a small glitch to a full blown breakdown – from plaguing this incredibly formative time for the new enterprise.
IT also has a broader understanding of:
- Relevant elements of the M&A or divestiture, and how they map to technology systems
- Expectations for the department during the transformation period, including:
- Cutting costs and minimizing the stranded cost burden. Once processes and goals are defined, IT system integration can aid in streamlining effort by reducing redundant or convoluted processes within the infrastructure
- Estimation for staff utilization before, during, and after transition
- Understanding the regulatory and tax requirements, both to determine the time allotted for transition and to determine the data that can be shared and the data that needs to be protected. In the case of a divestiture, the separation may spring one publicly traded company from another and it is likely to have severe data protection clauses for the parent company with which IT will have to comply
- Qualitative elements of the buyer-seller relationship, such as the differences between buying or selling assets with an equity firm and a strategic buyer or spinoff that may be a competitor or collaborator
Regardless of the industry or model the buyer and seller agree to trade in, careful and deliberate planning will expose opportunities for the CIO and allow him/her to capitalize on these to provide an enhanced value to the business. Among them:
- Use IT to streamline and corroborate the deal
- Simplify the IT landscape and aim to reduce fixed costs
- Seize the current disruption to redefine or add to the IT framework with newer, more agile technology (i.e., Cloud, IoT, AI, Data Analytics, Big Data, or open frameworks)
M&A or divestitures are a stressful, uncertain time for anyone involved. However, careful planning and stakeholder engagement can result in a transformed enterprise that runs faster and moves quicker. The input of the IT department is invaluable to this goal. The disruption and blurring of sector lines is forcing companies to anticipate challenges to their business models. IT can no longer be considered as a support activity, but must stake its claim at the discussion table as a stakeholder in the decision-making process.
Value Global will be attending P2 Energy’s ASCEND Conference in San Antonio, Texas. Managing Principal Shree Sannabhadti will be giving a presentation entitled “Anchor with Land”, detailing our proven methodology for IT to aid Oil and Gas entities during mergers, acquisitions and divestitures. We hope to see you there!