The world of M&A is complicated and nuanced. Whether a spin-off, split-off or carve-out, CIOs in particular face incredible complexity when factoring in people and culture, intellectual property, organizational process and especially IT systems and foundational digital solutions. While acquisitions have complexities in merging cultures and systems, many times breaking apart is far more challenging, especially when considering regulatory, legal, privacy and security factors. Integration provides the luxury of time to operate independently and strategically, while a divestiture is driven by the all-important TSA (transition service agreement), which impacts IT more than any other division.
Regardless of the flavor of M&A, CIOs encounter some of their toughest business problems during a divestiture or a merger. Here’s the expert advice you need to know.
Advice from the Trenches:
Ken Crafford, SFG founding partner, says it’s crucial for CIOs to get ahead of the curve early to understand the direction needed for technology-related activity. Your first step is to work hard to understand the things you can’t manage. That may include:
- Security and privacy, including the impact of global privacy regulations (country-by-country)
- Data retention, as well as understanding where all your data sits (is it US or global, or both?)
- Setting up the information technology foundation of new entity, as well as the new business rules
- The risk levels, from every angle
SFG Partner Mark Egan literally wrote the book on M&A when he contributed a chapter focused on M&A to CIO Perspectives. His advice underscores three main focus areas:
- A sense of urgency - Get it done in a reasonable timeframe, like 90 days
- Stay focused – You don’t want it to go on forever, but it will if you let it
- Concentrate on the people - Invest in great communications and turn up the empathy
SFG Partner Lars Rabbe says to deeply understand and be true to what the main reasons for M&A action is. “Too often the fog of war distracts from this and the real benefits are never actually achieved,” he says.
- Be realistic about the timing and cost of achieving synergies, because it is hard work to eliminate redundant systems
- Understand what gives the greatest benefit, such as merging customer accounts, prioritize those integrations and don’t allow complacency
- When in doubt, fall forward
Navigating the Challenges
During times of change, the unknown is always the biggest challenge. Leaders often struggle with the age-old question: “How do you know what you don’t know?” When planning for a merger, spin-off or carve-out, having an experienced perspective can be a determining factor in success or getting mired in challenges, such as:
- When juggling multiple activity tracks around technology solutions and data systems during a merger or split, is all about staying on schedule. Grace periods are expensive.
- Understand future-state architecture as early as possible so you can set the stakes early.
- Personal connection is king. Cultivate and act on personal relationships, especially during stressful times. Show people you care by engaging and showing your face.
- You don’t have to be perfect, so don’t have that expectation of others.
- While the natural inclination of any strategic leader is to work from the “known,” sometimes the best guess is just as effective
- Get as much help as you can. External expertise from those who have traveled the path can provide a roadmap to be efficient, empathetic and strategic.
The most valuable player on any deal team is someone who’s done it before, a lot. Collectively, SFG partners are the MVPs who’ve worked more than 320 deals for companies large and small. This strategic perspective of the landscape from the CIO/CISO point of view, and access to tried-and-true playbooks build on decades of experience, will help any company approach M&A with efficiency and empathy.
We can help with your next deal, too.
Author:
Ken Crafford, Mark Eagan, Lars Rabbe 2020