So, you’ve got a high-performance organization, a highly efficient leadership team, and your company culture is solid. The early days are long gone, and you’ve made a lot of progress. From a small start-up, you’ve grown into an enterprise that other companies are interested in buying.
Now what?
Do you sell your brainchild off for some lump sum, or would you instead merge with a larger corporation?
Mergers tend to be the most popular option these days. Obviously, too. Large companies, especially, often engage in mergers and acquisitions as part of their growth strategy. The fact remains that, despite the rapid advancement of these deals, many companies have not yet reexamined their processes in light of technological advancement.
Due to the growing dependence of companies on technology applications for their everyday operations, it has become increasingly untenable to handle M&A deals without consulting IT. Usually, IT departments are full of problem solvers. And it can be detrimental for a company to over-rely on their ability to “figure it out.” When mergers occur, there are often new managements and revised company goals. What usually happens is that despite the best efforts of the IT department, the new CEO or board may nevertheless complain that the solution does not reflect their ideal aspirations.
Here are a few ways to prepare for an IT merger:
- Start active preparation as early as you start looking for target acquisition.
If you’re planning to acquire a new company, don’t wait until you select the acquisition before planning the merger. Depending on how complex your IT systems are, you may need to dedicate many resources to merging them. A heads-up allows your IT team to assess the current state of affairs and flag anything that may pose a problem.
- Assess the IT assets of the target company before the merger
There may be fundamental differences in operating systems, security protocols, and documenting work between the two companies. Having these systems integrated may incur more costs than is bearable by the parent company, especially because many of these systems are essential for business operations. Involving both IT teams soon into the due diligence process will help them determine this and map out a feasible, cost-effective solution.
- Identify the core IT personnel in the acquisition company.
In addition to the technology and assets involved, mergers are also all about the people behind them. There are several reasons why mergers and acquisitions fail, but two that you cannot overlook are weak culture fits and human capital limitations. In preparing for a merger or acquisition, the human side of a union should be considered, from cultural integration to effective communication to change management. When conducting IT due diligence, evaluating the staff should be among the first things done to ensure critical team members receive the kind of employment package that will motivate them to join the new company.
Conclusion
The merger process differs from company to company. When one company takes over the other completely, and other times when they leave them relatively untouched and independent. As a final, more complex option, the companies might decide to find a way to synthesize something entirely new by using the best parts from each company and possibly even making their brand. Regardless of the merger method, both companies must ensure that the IT arm of the merger must remain effective, efficient, and unscathed.
Please feel free to contact us for any inquiries. Also make sure to read Substance Valuation Method – Pros and Cons.