Get Into the M&A Game


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IT leaders need a playbook to make sure corporate mergers and acquisitions reap the intended benefits.

CIO Ken Piddington says business mergers and acquisitions are a bit like football games. Unfortunately, for years his company kept him on the bench for much of the action.

So Piddington set out to change that. He spent a few months last year developing a playbook that describes how the company's IT department can help M&A deals succeed. It covers everything from the pregame meetings through the post-game commentary.

The strategy worked. "I've gone from not being included to having [a role] fairly early in the deal," says Piddington, the IT leader at oil distributor Global Partners in Waltham, Mass.

IT's Shortcomings

Analysts estimate that more than half of all mergers and acquisitions fail to achieve their business objectives, and while they say it's not fair to lay all the blame at IT's door, IT does play a part in those failures.

McKinsey & Co., in its January 2011 report "Understanding the Strategic Value of IT in M&A," found that "50 to 60 percent of the initiatives intended to capture synergies are strongly related to IT, but most IT issues are not fully addressed during due diligence or the early stages of post-merger planning."

Whether you call it a playbook, a checklist or a road map, an M&A plan is an actual tool, not just marketing hype. It helps CIOs identify what IT issues to address and when, from early-stage discussions through due diligence and into actual integration.

"We need our own checklist [that asks whether] the company is in compliance with their license agreements, what's the level of their personnel, what is the software they're using, how is the department structured, what we can learn from them," says Greg Taffet, CIO of U.S. Gas & Electric in North Miami Beach, Fla.

As with any checklist, the goal is to avoid forgetting something important. "When you're on the ground doing due diligence, there are 100 things being thrown at IT, and unless you have that workbook to go through, then you'll come out missing key points," says Hank Zupnick, CIO of GE Capital Real Estate, the commercial real estate division of GE Capital.

Hatzikonstantis has worked on the IT front in several M&A deals with previous employers. She recalls one case where her company thought it was buying another at a great price but learned through its IT due-diligence process that the target company had never paid for its desktop software licenses and faced a licensing liability in the millions.

But building up your M&A capabilities means you can do more than assess the IT assets, says Jim Smith, leader of the M&A consulting practice at PricewaterhouseCoopers. A skilled CIO who understands what motivations are driving the deal can figure out how IT can help reach the deal's stated business goals.

"Research shows that integrating information systems is one of the top challenges for any merger or acquisition, but it's the one where you can get the most benefits," Smith says. "It's critical to capture deal values."

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