Merger moves for chief information officers

There are few senior IT leaders that are not affected by merger and acquisition (M&A). M&A activity continues to grow and is predicted to peak at $5tn this year, according to consultant Ernst & Young.

Among the drivers for growth has been continued globalisation, the need to achieve ever-greater economies of scale, deregulation in markets such as utilities and telecoms, and access to cheap capital that has been driven by low interest rates.

While an economic slowdown is inevitably on the cards, M&A activity is likely to affect many organisations, and the CIO’s role, well into the future.

Recent research by CIO Connect highlights how 54 per cent of CIOs have been involved in up to three M&A transactions, with 42 per cent reporting involvement in four or more during their career.

The majority of CIOs (58 per cent) say they should be involved in any merger plan right from the outset.

When it comes to the impact of IT on M&A, CIOs believe they are delivering for the business. Almost half of CIOs (42 per cent) report IT merger costs account for less than 20 per cent of the total M&A integration expenses.

CIOs clearly believe that the most critical aspects for M&A success are those arising before implementation takes place. Such factors include agreeing business rules and objectives, creating effective due diligence and early involvement, and sitting above the issues related to the nitty-gritty of implementation, such as technical challenges and cost issues.

IT directors are aware that views of technology integration costs and the post-acquisition benefits of a merger or acquisition are less than accurate. Such concerns could ultimately impact shareholder value.

However, whereas IT could be a deal-breaker in the past, it is seen as less of an issue now that systems are more standardised. Culture is undoubtedly the biggest challenge ­ systems can be made to do what the IT director demands, but that is not the case with people.

The research findings demonstrate that the CIO involved in M&A needs to be an effective business leader, strategist, communicator and influencer, with appropriate levels of cultural sensibility and effective people management skills.

Indeed, the technology leaders surveyed believe that business and people skills are considerably more important for the CIO than technical or operational management skills, which most respondents feel could be delegated to members of their team.

Managing a merger

• Get involved in any M&A activity as early as possible
• Understand the business model
• If you are in an industry where M&A is ever-present, be ever-ready
• Become faster at integrating businesses and consider having a permanent M &A team
• Make the decision to acquire fast and do not debate for three to six months
• Tell people what is happening as soon as you can
• Understand forward investment plans so that you do not waste time and money
• Use suppliers’ M&A teams

Nick Kirkland is managing director of IT leadership organisation CIO Connect

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