Jeff Romano
Jeff Romano

Can companies afford to lose 20% of the value in an M&A deal?

Surely not. But that’s essentially what business leaders are doing every time they leave IT out of the initial planning activities. Exclusive attention is given to securing the business and extracting value; too little is spared to figure out how the two companies should interoperate from a technology, and IT, standpoint. It’s no surprise then that IT’s role in realizing and enhancing value in an M&A is overlooked.

An Ernst & Young survey of 220 business executives echoes this problem. Only 50% of the respondents said they involve IT in the transaction process, compared to 80% for finance. 47% agreed that value erosion could have been prevented with a more detailed IT due diligence. And a little over a quarter reported that IT issues often block post-transaction objectives.

This oversight can have significant consequences for companies. Transaction value realization gets dragged out, synergy opportunities lost, and shareholder value destroyed. No surprise seeing that technology underpins almost every function in a company today—especially since the COVID-19 pandemic, companies have relied on IT to facilitate remote work and enhance digital experiences for business continuity, better operations, and customer engagement.

And IT can often be the biggest cost driver in an M&A. How will payroll systems be integrated? How will financial systems be combined? How will HR systems interplay? How long will it take to merge these IT systems? As the business races toward Day One, these questions threaten to diminish or, at worst, derail the deal.

IT’s role in M&As is as much about minimizing risk as it is about maximizing value. And involving IT right from the start is key to realizing the full benefits and value potential of an M&A event. At least 50-60% of the initiatives intended to capture synergies are strongly related to IT.

But how can you as the IT leader earn a seat at the table on day one? And how can IT prove its value and play a bigger role in M&As? It all boils down to mastering the four stages of the integration process:

  1. Planning—does IT have a repeatable, proven plan to maximize value?
  2. Integration—does IT have sufficient resources to handle an M&A project?
  3. Communication—how should IT dependencies be communicated to non-IT executives?
  4. Optimization—what does it take to improve operations in the long term?

By following these four key steps, you would be better prepared to evaluate the readiness of both companies, spot value creation opportunities, and elevate any M&A event.

 

 

Ready to take the lead in M&A integration?

Read the full strategy brief for an analysis of the challenges in each stage of integration—and actionable advice to address each of them.

Download Now

Jeff Romano
Vice President, Consulting

Jeff is a sourcing expert who has been involved in many multibillion-dollar engagements. He brings more than 30 years’ experience in IT management to Wavestone US' consulting team.

Laying the Foundations: The 4 Core Competencies of Effective Cloud Solutions Security

Sep 21, 2023

Implementing effective cloud solutions security is complex. Solution security architectures must be initially done with minimal mandated standards, then built progressively, with additional layers of security built on foundational capabilities. In this first of a 3-part series on safeguarding cloud solutions, we examine the 4 foundational capabilities of effective solutions security and best practices to implement them.

Wavestone Named to Forbes World’s Best Management Consulting Firms 2023 List

Sep 19, 2023

Forbes has once again recognized Wavestone in its annual “World’s Best Management Consulting Firms 2023” list. Read our blog for more information about the ranking and Wavestone’s award-winning business and technology consulting services.

Have a Question? Just Ask


Whether you're looking for practical advice or just plain curious, our experienced principals are here to help. Check back weekly as we publish the most interesting questions and answers right here.

Ask Wavestone