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Winning with an

IT M&A Playbook
What brings repeated success in mergers and
acquisitions? What ensures that IT does not cause
a deal to falter? A playbook that makes IT integration
faster, better, and future-proof.

Winning with an IT M&A Playbook 1


Information technology plays a crucial role in any M&A. When IT fails in M&A, the repercussions
are felt far more deeply than the failure of any other function, not least because IT is the lifeline
of nearly every aspect of business operations. Our global merger integration survey found
that more than one-third of failed acquisitions are the result of unaddressed IT issues. IT issues
can sink a perfectly good acquisition, cause post-deal crises, lead to acquisition aftershocks,
and result in missed opportunities to innovate (see sidebar: IT Implications in M&A).

An M&A playbook is much like


a coach’s playbook, setting out
the strategies each player must know
during the game.
We believe a “core competency” approach to IT in a merger or acquisition is required not only
to enable a business integration, but also to establish an IT organization fit for the future.
Companies can achieve these dual objectives by creating their own IT M&A playbook.

The IT M&A Playbook


In sports, a playbook sets out the plays and strategies each player must know during a game.
An M&A playbook is much the same: a plan or set of strategies that outlines a particular
campaign—be it a merger, acquisition, or divestment. The playbook brings together all of the
activities that an M&A integration team and all other relevant parties need to perform across
the deal lifecycle.

IT has three important objectives in an M&A: (1) ensure from day one that the merger causes
minimal disruption to its stakeholders (including customers, suppliers, and employees);
(2) play a major role in delivering and enabling synergies; and (3) contribute to developing
the company’s long-term IT operating model.

IT Implications in M&A

IT is never the sole reason for an large an investment to make Paying inadequate attention
M&A, but it can easily be a deal the deal worthwhile. to sustainable IT integration
breaker, or at least a delayer. One can result in an IT environment
European services company IT lead times are usually longer that reflects the company’s
postponed an acquisition by than the time needed to com- acquisition trail. This forces
more than six months because plete a deal, and IT resources chief information officers (CIOs)
of the substantial investment are already stretched to support to embark on a never-ending
needed to integrate the target’s business as usual. So the risks journey of simplification and
IT into its own centralized IT of failed integration can be very optimization.
organization. In another case, real. For example, on the first day
the merger of two banks failed after the merger of two European
when they discovered that banks, bank tellers did not have
combining their respective access to a common set of
IT systems would require too banking services.

Winning with an IT M&A Playbook 2


Each objective is important to an acquisition’s success. Although many organizations merely
expect IT to be an “enabler,” an acquisition can in fact be a prime opportunity to improve
overall IT capabilities. IT’s mandate to capture synergies quickly often focuses so much on
consolidating the IT function—including applications, infrastructure, and headcount—that the
target’s potentially valuable niche IT capabilities are missed. So while capturing synergies
improves operational efficiencies and lowers IT costs, it does little to foster innovation or mold
an IT organization of the future.

However, we have seen some forward-looking examples where M&A had served as an umbrella
project for a broader IT transformation. One European engineering services company used
an acquisition as the catalyst for fundamentally improving its IT and taking advantage of the
acquired company’s systems, infrastructure, and people where these were superior. In another
case, a U.S. consumer goods company chose to replace its own IT staff with the top talent from
an acquired organization. Both companies understood, before acquiring their targets, that
IT was a vital component of their businesses and made it core to their acquisition strategies.

The IT M&A playbook an organization develops must take into account each of these objectives,
and it should be tailored to the organization’s specific context. All playbooks must ascribe
to five main principles:

Involve IT early. IT’s role in any M&A should begin at the deal’s outset, not just—as is sometimes
practiced—during post-merger integration. For example, giving IT a seat at the due diligence
table will bring a more realistic understanding of the risks and what it would take to execute
the deal. A holistic playbook recognizes this, covering the entire M&A life cycle from target
selection and due diligence to merger planning, post-merger integration, and synergy
realization (see figure 1).

Address various acquisition scenarios. Because no two acquisitions are alike, they should
not be integrated in the same way with the same approach, nor should they follow the same
set of priorities. The playbook should not be merely a prescriptive set of processes and activities.
It should be flexible enough to handle different scenarios.

Figure 1
A holistic playbook covers M&A from planning to completion

Reap benefits on Du Reduce risks


ati ed
• Execute decommissioning plans aliz il • Identify IT risks and deal-breakers
• Track synergies
e • Estimate integration lead time and costs
ig
yr

en

• Implement long-term IT transformation • Establish IT baseline


erg

ce

programs
Syn

Execute plans Create a vision of the future


Po s t-

• Implement target IT services and • Establish IT integration framework


g

operating model
nin
me

• Finalize IT synergies
• Manage transition service agreements • Develop high-level target IT operating model
an
rg

• Conduct systems integration


ri
nt
e

er
pl

• Plan and deliver day one


• Migrate data eg rg
rati Me
• Migrate and transition essential data
• Execute retention and severance plans
on and systems
• Shift to business as usual • Develop decommissioning strategy
• Agree on transition service agreements
• Create integration budget

Source: A.T. Kearney analysis

Winning with an IT M&A Playbook 3


The playbook should not be merely a pre-
scriptive set of processes and activities.
It should be flexible enough to handle
different scenarios.
IT requirements vary depending on the type of acquisition. The most common M&A scenarios are
shown in figure 2—business extension, bolt-on acquisition, full acquisition, and merger of equals.

In addition, M&As may also need a simultaneous divestment or an IT carve-out to satisfy


regulatory and competition commissions, and the playbook will need to accommodate this.

An IT integration team must be able to apply the playbook, whatever the M&A scenario. Different
acquisition scenarios can be factored through route maps, which provide a navigation path
through the playbook, making it easier for team members to comprehend the scope of their
work. Based on the acquisition type, a route map guides the team through configurable
processes, tools, and accelerators that can be adapted to specific needs of the M&A.

Figure 2
Four scenarios for merging IT organizations

M&A 1. Business 2. Bolt-on or 3. Full company 4. Merger of


scenario extension carve-out acquisition equals
(diversification) acquisition

Acquirer Target Acquirer Target Acquirer Target Acquirer Target

Mainly
data

A T A A A+T

Typical IT Loosely coupled IT Adopt acquirer’s IT Select IT Best of breed IT


integration of one party
model

IT • Limited IT synergies • Low IT synergies • More involvement in • High synergy


implications • Minimal impact on • Low impact on day-one planning savings opportunities
IT operations IT operations efforts • Future IT involving
• Consolidation of • Data migration • Acquirer IT work common infrastruc-
data required for crucial typically unaffected ture, central core
financial and and current support, and
management challenges remain distributed value-
reporting • De-commissioning added IT capabilities
of IT systems
• Revoking of licenses
that are not required

As-is acquirer Acquisition target’s


A IT organization
T IT organization

Source: A.T. Kearney analysis

Winning with an IT M&A Playbook 4


Incorporate connectors with other business functions. IT does not work in isolation during
an integration, and its interactions with other work streams are crucial to M&A success. These
interactions, or connectors, work best when they take into account the needs of other business
functions to ensure alignment and to facilitate coordination (see figure 3).

In an advanced level of the IT M&A playbook, connectors provide a “plug-and-play” approach


to help manage the overall M&A. Increased efficiency is the biggest benefit of this approach, as
it shortens the acquisition cycle and hastens the capture of synergies. Without these connectors,
IT integration programs suffer time and cost overruns. Since IT has become the backbone
of virtually all business enterprises, having these connectors—and getting them right at the
appropriate juncture—is imperative for M&A success.

Accelerate the process. Aimed at shortening the M&A timeline, accelerators are checklists,
tools, and templates needed to manage the M&A effectively. Ranging from IT due diligence
questionnaires to IT synergy-realization templates and benchmarks, the accelerators span all
four phases of the M&A life cycle. The playbook should include examples of these accelerators
from previous acquisitions to help integration teams jump-start their activities and to accelerate
the learning curve for new team members.

Live by lessons learned. Every integration is unique, so it is essential that integration teams
learn from past lessons—both positive and negative—and update their approach for future
deals. The lessons range from important missed activities to poorly timed interactions with
other functions, communication methods, benchmarks, and contractual arrangements. Keep
in mind that it isn’t just your own M&A that offers valuable lessons. There is much to be learned
from watching other mergers or acquisitions—even those in other industries.

Figure 3
IT connects functions and work streams during integration

Illustrative

Function or work stream IT focal point


Sales and marketing • Website migration • Branding

Procurement • IT contract rationalization


synergies

Human resources and organization • Retention and • IT people movement • HR policy changes
severance

Facilities • Future location • Future IT services • Cutover synchronization


strategy demand

Finance • IT synergy estimation • IT integration budgets


and tracking

Tax and legal • New tax structures • Legal policy changes


and models

Project management office • Overall integration • Roles and responsibilities


framework

M&A team • Deal logic • IT due diligence

Communications • Town hall briefings • On-boarding


communications

Source: A.T. Kearney analysis

Winning with an IT M&A Playbook 5


Cases in Point
The value of a structured IT M&A process is illustrated by some examples of companies that
reaped substantial benefits and credit the playbook approach for turning integration “from
an art to a methodical science.” The playbook allowed each company to do it quick, do it right,
and keep IT going (see figure 4).

Figure 4
Turning integration from art to science

Do it quick Do it right Keep IT going


• Complete IT due diligence within • Deploy seamless acquisition method- • Ensure that continuity and
two weeks ology and structured IT processes performance are never compromised
• Integrate financial and reporting • Integrate M&A targets in six weeks in an integration
data within four weeks on average • Integrate acquired companies
• Decommission systems within • Achieve an unusually high employee rapidly while involving a large portion
four months retention rate of 80 percent from of the IT staff
target companies • Involve more than 60 percent of the
• Handle different acquisition types IT staff in the integration process
efficiently

Source: A.T. Kearney analysis

Do it quick. An engineering services company credits its IT playbook for its ability to complete
due diligence within two weeks, integrate all financial data within four weeks, and decommission
systems within four months. The company’s senior leaders say the IT M&A playbook approach
has become the most significant component of their acquisition strategy.

Do it right. A global telecom company integrated its M&A targets within six weeks on average
by employing a highly structured process. The company also achieved an unusually high
employee retention rate of 80 percent in its acquired companies, thanks mainly to its seamless
integration processes. In another example, a major conglomerate used an “integration complexity
grid” within the playbook to identify unconventional aspects of any deal that might require
a customized integration approach.

Keep IT going. A global news organization incorporated a comprehensive IT integration


process to ensure that continuity and performance are never compromised during integration.
The company completes roughly one integration per quarter, with more than 60 percent of its
IT staff participating in the integration process.

In short, the IT M&A playbook not only increases the speed and reliability of integration, but
also helps reduce costs while ensuring a seamless acquisition and long-term success. This can
also generate important intangible benefits: better employee retention, a consistent process
driven by internal discipline, better development of core competencies, and an IT capability
that is reliable throughout the acquisition process.

Winning with an IT M&A Playbook 6


Making the Playbook a Success
Once the IT M&A playbook is formulated, its success depends on its active deployment and
continuous improvement. We recommend several steps to embed the playbook within the
organization and exploit its value fully (see figure 5).

Provide easy access. The best playbooks are modular and hosted on an internal wiki or collabo-
ration portal that provides global access, where navigation is driven by the M&A phase, the
acquisition type, the function, or the work stream. The playbook deserves a prime position
on the organization’s internal IT home page, where people access other important applications.

Make the playbook a success


by engaging and training the organization,
providing easy access, and seeking
continuous improvement.
Engage and mobilize. Because the playbook benefits the entire company, everyone in the
company must buy into it. People must be engaged early, with M&A teams providing positive
feedback and endorsing the playbook concept. Success stories from past M&As can help
position the playbook as a proven, practical tool kit. Capturing lessons learned will encourage
engagement and create a positive feedback loop.

Train people. A dedicated pool of IT integration experts, although costly to maintain, makes
sense for companies doing frequent deals. More often than not, these expert practitioners
already have a process in mind. However, a documented playbook—complete with accelerators,
examples, best practices, and pitfalls—ensures consistency and the application of best practices.

Figure 5
Putting the playbook into effect

Sustain and improve Provide easy access

Integrate across functions Engage and mobilize

Train people
Source: A.T. Kearney analysis

Winning with an IT M&A Playbook 7


In other cases, rapid mobilization and incorporation of IT team members can start with
establishing a baseline understanding to build upon before the project starts. We find that
showcasing the playbook in interactive “road shows” is an effective training tool and an
excellent way to achieve initial buy-in.

Integrate across functions. An M&A playbook is a structured set of processes that brings all
functions together to help things run smoothly and quickly. An IT M&A playbook must be a subset
of the larger holistic M&A playbook. Some succeed in having M&A playbooks in place for various
functions, and their experience points to similar structures and implementation attributes
as key success factors. Similar structures refer to the breakdown by phases in the M&A life cycle,
relevant processes and activities, and supporting accelerators and examples in all playbooks.
Implementation attributes are the playbook’s access mechanism, design, layout, and delivery
format—all of which should be consistent across function areas.

Sustain and improve. Continual monitoring and improvement will keep the playbook relevant.
Incorporating lessons learned and best practices from previous deals and using examples
to illustrate success stories are just as important as outlining processes and activities. For
example, pulling data from previous integrations into your cost and time estimations can
improve the accuracy of future estimates, and including retained staff’s feedback will help
assuage anxieties and expedite integration and a return to business as usual.

Build Forward Momentum


While the IT M&A playbook concept offers a systematic and efficient approach to integrating IT,
it is not a standalone strategy. It is important to get the M&A basics right: resolving people and
power issues, retaining top talent, addressing cultural differences, ensuring effective communi-
cations, and managing relationships with partners. The playbook works best when combined
with superior planning and execution. This potent combination will create forward momentum
for future integrations regardless of how business and market conditions evolve.

Authors

Charles Hughes, partner, London Farhan Mirza, principal, Dubai


farhan.mirza@atkearney.com

Shubradeep Ghosh, consultant, London


shubradeep.ghosh@atkearney.com

The authors wish to thank Amit Jhinzuvadia for his valuable contributions to this paper.

Winning with an IT M&A Playbook 8


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