Opinion

Why IT remains a critical factor in merger and acquisition success

Eduardo Niebles, BST Global

Understanding the technology issues during merger and acquisition discussions can save pain in the long run, says Eduardo Niebles.

In January 2014, AMEC announced the acquisition of Foster Wheeler. Two months later, Cardno announced its acquisition of PPI. Then in July, AECOM announced is was to buy URS Corporation. And most recently, Arcadis completed the purchase of Hyder.

Over the past year, there has been a sudden increase in acquisitions in comparison to 2013. This uptick in mergers and acquisitions is fueled by a number of factors, including: client demands for greater scope of services from consultancies; the continuing shifts in global market dynamics of a slowly recovering, mature market; and emerging country-specific markets in Latin America, Africa, and the Middle East.

"One criterion for success in any type of merger is when the entire organization creates business processes that are enhanced and supported by an integrated business management solution platform."

There are many post-merger considerations to address, including technology business management systems. While many firms speak of synergies from M&A activities, this concept is not often emphasized with regard to business systems until after – usually, long after – the deal has been done. When a single business management solution and technology strategy is running, creating one dynamic and innovative organization from two or more businesses can be rapidly realized. And in this era of big data, information derived from technology can be the competitive differentiator for future consultancies.

One criterion for success in any type of merger is when the entire organization creates business processes that are enhanced and supported by an integrated business management solution platform. Engineering consultancies typically have three options when it comes to a unified business technology platform:

  1. Develop new processes that bring together the strengths of the merging companies and integrate the companies IT platforms.
  2. Select one of the company’s business processes and integrate gradually across all the business units, while improving on the business processes.
  3. Do nothing and let each company operate individually based on its corporate culture and approach.  

This task is made more challenging by the fact that consultancies are often operating at various levels with clients, have multiple companies/offices and resources stretched across globally, have company and project financial currency and regulatory requirements, and massive information flow. For these reasons and others, selecting the right business system to achieve and support that synergy capture approach can be quite daunting from an executive perspective.

Recognizing Information Technology 

While information technology may have a limited impact on the valuation of an M&A deal, getting IT involved during the M&A process is important in order to identify critical synergies and post-merger impacts. Firms must recognize that IT activities need to closely align with the business activities during the M&A process. Consider the following areas of an M&A transaction:

Due Diligence

Performing proper due diligence in the area of IT can help identify risks and opportunities regarding compatibility and integration challenges. The risks could be, for example, instability issues that will need to be address quickly, once the deal has been done. Examples of opportunities include cost reductions, resource utilization in new areas, and the identification of processes that can be supported through IT to ensure synergies are achieved.

A key element in the due diligence phase is to form an IT integration team early. This team should have knowledge and experience regarding the business processes and understand fully the main objectives going forward.

"The execution phase is about enabling business processes and technology integration, and handling change management challenges when blending company cultures."

Post-Merger 

Once the deal has been made, consider now that a blue print for IT integration needs to be developed. Consider the three options identified earlier, and determine the merits of each options by performing comparisons, and assessments of the systems in place.  This is a critical stage, because emotions run high, and focus needs to be on the final product.  Typically, the decision is usually based on the strategy and goals set for the new entity.

When determining which direction to take, begin with the end in mind and work backwards. Some key questions to consider include:

  • What is tangible business value that is expected?
  • How can the firms combine processes to achieve the best synergies possible?
  • What can be done early on in the post-merger process in relation to money and resources to better support the success of the merger and the new entity moving toward a unified business management solution?
  • What are the necessary requirements to keep the business running (i.e. generate new business, invoice customers, deliver on projects)?
  • What opportunities exist to use technology to differentiate and position the new entity for future growth?

Execution

The execution phase is about enabling business processes and technology integration, and handling change management challenges when blending company cultures. Use effective communication, and assess quick wins during the post-merger integration to publish realized benefits.  

The decisions and actions taken by senior executives are where mergers and acquisitions transpire. However, the business of creating a high-performing, post-merger organization that is communicating across all levels depends on implementing processes that enable all employees to work from the same level of information gathered, to collaborate, and to respond to client needs rapidly. One of the most effective ways to make this happen is through a unified business system that has been envisioned and included early on in M&A discussions.

Eduardo A. Niebles is the Managing Director, International Business at BST Global, an international business management software and cloud solutions provider for the world’s leading Architectural, Engineering, and Environmental Consultancies.

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