Every IT post merger integration is different - experience and plans help

The earlier the IT managers are involved in the merger process, the more confident they can act

// IT-Outsourcing, IT-Strategy

The merging of companies, the outsourcing of parts of a company or the transfer of individual core processes to a service provider - corporate IT is directly or indirectly involved in all these complex processes. Sometimes it is even the direct and exclusive scene of the action. As different as companies are, as diverse are the necessary steps they have to take on their way to each other or away from each other. Tried and tested plans, checklists and process models facilitate the demanding job that IT managers have to do after the merger.

 

Whether share deal or asset deal - the complexity should not be underestimated

For some companies, mergers and acquisitions are frequently recurring events, for some they are the exception. Regardless, time and again companies are faced with the challenge of integrating (carve-in) or carving out (carve-out) companies or parts of companies.

A first fundamental question in this context is the nature of the deal. While a "share deal", in which entire shares of a company are bought or sold, still seems very manageable in terms of the delimitation of the data to be transferred, "asset deals" are much more complex in this case. Here, the new owner of the company to be integrated takes over individual assets, employees and business areas, which then have to be cut out in the large databases of the original company. If necessary, this can go down to the question of which individual contracts are to be transferred from the ERP system.

Here, the internal IT organization is also repeatedly called upon to support M&A projects, as IT services are usually provided by the internal IT department.

The above-mentioned complexity of an asset deal and its effects on feasible implementation times are often not clear at first glance, especially to those responsible in the company who prepare and decide on such company acquisitions.

 

Learning from experience: the noventum IT procedure model for M&A projects

In order to make this IT support in M&A projects more flexible in future and to improve the speed and throughput time in implementation, noventum consultants have developed an IT procedure model for M&A projects. The procedure model enables the reproducibility and standardisation of activities for the integration or spin-off of companies and parts of companies. The model was developed and refined during various M&A projects. It represents a basic type of M&A: a part of the seller's company is integrated into the buyer's company.

The generic, superordinate view of the IT procedure model M&A shows the phases of IT activities on the time axis and defines terms used by the customer in M&A projects in order to develop a common understanding. The detailed planning of the individual IT phases defines work packages and sub-activities during the term.

noventum process model Mergers & Acquisitions

For the M&A toolkit: checklists, questionnaires, working documents ...

Parallel to the IT procedure model, working documents were developed which project staff can use over the course of the project. These consist of information documents that provide assistance, e.g. for completeness checks, such as the "Post Merger Integration Questionnaire" or the "Post Merger Integration Checklist", as well as templates that can be used for documentation purposes for recordings, result analyses and concepts.

The following IT subject areas can be defined for the further design of activities and results:

  • Essential through IT-supported business processes
  • IT strategy
  • Service management processes, IT organization and IT operating model
  • IT Platforms
  • IT applications (SAP/Non-SAP)

 

The quality of IT due diligence - is a decisive factor for the entire PMI process

In post merger integration (PMI), e.g. into the processes and structures of the acquiring company, success depends on many factors. In addition to the general question of whether an integration (carve-in) will result in a full or partial integration of the acquired company or whether the acquired company will be retained as an independent entity, the quality of the due diligence results often determines the further planning options for the transition. Both factors also influence the integration on the IT side.

Due Diligence generally serves to analyze legal and economic risks and also considers strengths and potential weaknesses of an M&A project. It looks at synergy potentials and the quality of this phase is highly dependent on the availability of the required information. The success of the due diligence often determines not only the deal as such, but also the success of the entire integration project. In this respect, the following critical success factors of due diligence play an essential role in the preparation:

  • The availability of the required information in a phase that is usually characterized by confidentiality requirements
  • Maximum information procurement in a usually very short time window
  • Availability of contact persons for the procurement of information
  • Cooperation between the persons involved on the buyer and seller side
  • Close exchange of IT with the relevant technical disciplines in the company (purchasing, accounting, controlling, etc.)
  • complexity of the general project

 

For IT due diligence, it is also important to identify influencing factors, risks as well as strengths and weaknesses that may arise from the current IT operations of the company to be included, for example, during integration.

 

IT managers must be involved in the PMI process from the very beginning

However, the relevance of involving the buyer's internal IT organization at an early stage before the process is started is not always clear. The earlier the internal IT organization is involved in the planning of an M&A project - the preparation of an M&A strategy or the pre-selection - the better the chances of being able to make qualified statements about the influencing factors, time requirements and costs of the PMI. Thus, the analysis of the current IT operation provides the buyer with essential information not only regarding the current IT operating costs but also how well its IT operation can be integrated into the own IT strategy and the own current IT operation, i.e. which synergy opportunities arise, which in turn have to be evaluated in monetary terms. Synergy opportunities are made more difficult and post merger integration costs are increased if the candidate to be evaluated

  • a low degree of standardization of the essential applications, a high degree of use of proprietary solutions,
  • small-scale data centers are operated at different locations,
  • a large number of third-party IT service providers are involved,
  • there is a heterogeneous, little standardized system landscape,
  • different working methods or service management processes are visible at different locations,
  • the IT management works event-driven.

 

The target picture of future IT in view

Templates and checklists help to ensure efficient design and the quickest possible ACTUAL recording. They structure the relevant activities of this phase and take into account the topics relevant for the target design of the "Future Mode of Operation (FMO)", the target concept for the operating model, infrastructure, applications and the future IT service delivery. The results of the Due Diligence are mapped in corresponding templates and in parallel the target image (the Future Mode of Operation) is prepared in a target concept.

With regard to the specialist subject areas such as applications / ERP, IT architectures or service processes, among others, important decisions have to be made for the design of the target picture. If, for example, the buyer's ERP solution is used in the future (e.g. scenario A), or that of the seller (scenario B), these will be operated in parallel in the short or long term, or are there general conditions that speak in favour of using a completely new "New World" solution.

Careful planning ensures ongoing IT operations in transition

The due diligence also on the IT side ends with the signing of the contract for the M&A transaction and initiates the phase of initiation and planning, in the first step, in order to realize a continuous IT operability by both parties for a defined period of time after signing the contract. The planning for this usually takes place parallel to the due diligence and has the primary goal of ensuring the stability of the ongoing IT operation, among other things. IT tools and procedures are planned for collaboration, which has to be ensured in the short term. This can be the continuation of the business applications or a transitional solution to the support model for IT disturbances and service requests for the employees to be integrated. Under certain circumstances, equipping the employees to be integrated with the purchaser's equipment at short notice can be the means of choice, for example, to ensure quick and easy remote access to central systems such as the purchaser's e-mail system.

In the actual transition phase, (named or all) IT services are transferred to the target organization of the host company or buyer. In order to counteract uncertainties in the post merger integration process, checklists and templates for the planning of the integration/transition have been developed for the above relevant topics and clear responsibilities for the implementation have been defined. The documents serve the project participants to check for completeness during the planning and implementation of the transition.

Critical success factors:

  • Knowledge of the general objectives of the M&A project
  • Reliable Due Diligence results and documented actual state
  • Strategic concept/objective of the Future Mode of Operation IT
  • Clear responsibilities
  • Keeping critical know-how in the company (acquired company) or providing expert contact persons there
  • Defined checklists for the process
  • Standardized project management

 

Conclusion

Business processes of any kind are almost completely dependent on a functioning IT system. This is particularly noticeable in times of change, which often include mergers and acquisitions. Companies that have recognized this dependency can, through good planning and preparation, confidently tackle the next change and bring it to a successful conclusion. Intimate knowledge of their own company and professional experience with PMI methods are the key to success.

noventum consulting

Judith Wagener

Service Manager

 

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