IT as a driver of M&A success
7 critical pre-deal IT steps
- Know your systems
The vendor needs to have up-to-date information on all IT assets, costs and initiatives to pre-empt IT being used as leverage in negotiations during pre-deal. Acquirers can only assess IT-related costs if they conduct a thorough due diligence on a vendor's IT environment and organization. In the absence of data, the acquirer will make the assumptions on IT costs, which may affect the purchase price.
- Involve IT early on
Unless the IT team is involved in the entire M&A process, synergy cases will depend on unrealistic benchmark figures and it will be difficult to assess how IT can enable business synergies. Make IT staff aware of what the deal is aiming to achieve and how they can aid in that goal. If a carve-out or integration is involved, bringing all work streams together helps drive out interdependencies between work streams and decisions that affect multiple business functions.
- Communicate deal objectives and synergy case
IT teams should not work in a vacuum. They need to understand the strategic rationale for the transaction to know where to focus diligence.
- Plan for final goals
Management and IT need to create a template for the ideal system to fulfill the merged companies' needs. Following a plan will focus on potential savings without affecting the end game.
- Plan for day one with a view to day one-hundred
Ensure that there is a solid foundation for the company to operate under from day one of new ownership. In some cases, due to immediate cost‑ cutting programs, important IT staff have been laid off during the first week of the transaction, resulting in a lack of expertise around important systems.
- Create a migration strategy
Legacy systems are one of the hardest aspects to confront after a merger. M&A directors should ensure that legacy system operators will be on board post-deal. Replacing knowledge of these systems can be expensive or even impossible.
- Transitional Service Agreements (TSA)
Continuity of business is key and therefore identifying IT services, the costs and levels of support needed post-deal is essential for planning and negotiating TSAs with vendors.
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