Now that you’ve learned the importance of due diligence during a merger and acquisition (M&A), you need to know the importance of — and how to perform — a successful IT post-merger integration (PMI).
Mergers and acquisitions, particularly when it comes to IT, don’t end when you’ve wrapped up due diligence and the ink dries on the contract. After you’ve conducted due diligence, identified synergies, cost savings and innovation potential, and addressed risk factors, it’s time to begin post-merger integration.
Also called M&A integration or post-acquisition integration, this process is critical to ensuring the two former companies operate seamlessly as one and create the expected value for the acquiring business. Much of the IT post-merger integration revolves around infrastructure, software applications, changing business processes, and redesigning the company to streamline, add new skills and eliminate redundancies.
Ideally, during the due diligence process, the companies will discuss potential integration options, as well as align the goals and budget for this phase of the project. The reality, however, is the decision of what route to follow often doesn’t take place until after the transaction.
Modeling Options for IT Post-Merger Integration
Before getting into integration, both parties must agree on modeling. There are several modeling options for you to consider, but it often has to do with how the acquiring company plans to operate in its end state. Here are a few to choose from:
- Independence — Each company operates independently of one another.
- System Connectivity —You connect each company’s systems so they can securely share information.
- Shared Systems — Companies move to the same system or software applications, but they continue to operate independently and run in separate instances.
- Single System Adoption — A full integration in which the acquired company moves its systems to those of the acquiring company, and the acquired company eliminates its systems.
- Hybrid — Any mix of the above operating models, depending upon goals and objectives of the company, budget and other factors.
Once you’ve identified a model, the acquiring company will follow the final steps of a successful assessment approach: designing the future state, building a roadmap and execution plan, and finally executing the roadmap.
Step Three: Design the Future State
Along with completing steps one and two — the current state assessment during IT Due Diligence — this step covers what the company looks like in terms of IT once you complete the integration. A clear understanding of the objectives and the journey to get there is essential to the ultimate success of IT post-merger integration.
Architect the future state of IT in the following areas:
- Organization: What IT architecture do you need to support the selected operating model, and how can you scale it to sustain the business?
- Applications Portfolio: Determine what software your teams are currently using. Evaluate websites, mobile apps and other digital tools that connect users.
- Infrastructure and Operation: What will the data networks, server stacks, security protocol, help desk and other infrastructure-related aspects of the company look like?
- Risk Management: Consider cybersecurity protection, disaster recovery and business continuity planning.
- Operating Cost: The goal is to run the combined company for less by realizing synergies and eliminating redundancies.
Step Four: Build a Roadmap and Execution Plan
While it may seem like you’ve been creating the integration plan all along, this is the step where you lay everything out in a clear, cohesive and understandable way. It’s imperative to understand your company’s current state and end state goals to determine a roadmap for getting there with the resources and budget allocated.
Elements of this phase include:
- Goals and Alignment: These are the baseline goals to achieve through the PMI process.
- Integration Map: An integration map outlines how to get from point A to point B, along with the structure you need to execute the process logically.
- Prioritization: Determine what activities are essential and the order in which you should conduct them.
- Roadmap: Create a bird’s eye view of the path to post-merger integration, laying out the steps precisely. You should list out timing, responsibilities and expectations for reference as the integration takes place.
- Investment Budget: Lay out the overall budget and how the company is to use it.
Step Five: Execute the Roadmap
Once all the pieces are in place, you can begin the post-merger integration. Despite the planning, you must closely manage the final phase of PMI to ensure continuity, continue to assess resource and risk management, and ensure the integration stays on track in terms of schedule and budget.
Without a comprehensive approach encompassing a high level of detail laid out in a post-merger integration plan, a complete understanding of the elements, and how they align, companies expose themselves to unnecessary risk and PMI failure. Companies who don’t effectively plan their PMI IT strategy are less likely to achieve revenue targets, marketing objectives, market share and other higher-level company goals.
According to Morgan Stanley bankers, the M&A market in 2021 is already on the rebound and poised to accelerate. Further, Business Chief Magazine reported that according to collated research and a recent Harvard Business Review report, the failure rate for mergers and acquisitions sits between 70 percent and 90 percent.
“Without a clear strategy, effective project management and open communication between stakeholder groups, the merger or acquisition will struggle to deliver the desired results. The process must be transparent, realistic and involve all areas of management if success is to be achieved,” Business Chief noted.
It’s important to remember that no two post-merger integrations are alike, and IT is a critical element in today’s business world. That’s why it’s crucial to lay out the steps, plan, provide appropriate project oversight and continuity assurance, and continue to monitor risks, budget and timeline. Stay the course, continue to be mindful of the overall company goals and follow the proper steps to help ensure a successful PMI.