Part Three: Systems and Technology
Companies seek to accelerate revenue growth or enter new markets through mergers and acquisitions. They spend a lot of energy and resources identifying the right targets based on synergy and combined financial models.
But oftentimes, the real value of the acquisition is not realized. M&A typically fails during integration. All that effort and capital spent on acquiring the target is wasted.
There are multiple factors from a technology perspective that can cause problems for acquisitions. In this segment, we will look deeper into those challenges and talk about how best to approach this important aspect of acquisition integration.
What are the things to be integrated?
To kick off the conversation, it is helpful to identify the various systems and tools that need to be integrated as part of an acquisition. It is easy to minimize this aspect of integration because the people who put these deals together (and who are likely reading this article) don’t live in this world. However, there is a lot to consider here and if not managed and executed properly, the anticipated timeline and synergies of the acquisition can be missed.
The items below represent the core systems and tools relevant to any acquisition scenario:
- ERP / Accounting / Expense reporting
- Phone Systems
- Internet & Networking
- Email / Spam Filtering
- Single Sign-on (SSO)
- Network Drives / File Sharing
- Backup Systems
- Chat / IM Tools
- Web & Video Conferencing
- Mobility (cell phones and hot spots)
- Internal Servers / Hosting
- DevOps Tools (remote desktop support and system monitoring)
- HR Systems (time tracking, performance management, PTO)
- Marketing Automation Systems
- Project Management Tools
- Helpdesk Tools
If the companies involved deliver a technology product, the integration effort must also take into account those products, the teams that develop them, and all the tools and processes that are part of that development effort. And while the items listed above represent a formidable integration challenge, bringing together multiple products and product development teams is an even greater integration challenge.
Integrating Core Systems
There is no set “right” way to do this, however, I do think that there are some guiding principles that can help you focus first on the things most critical to the overall success of the acquisition.
- Shared Identity – once the deal is done, focus first on the tasks that will allow the combined organization to appear as one – both internally and externally. Internally, make it easy for the new teams to communicate with each other and access shared resources. This ties back to chat/IM tools, SSO, access to shared drives, and a unified phone system – things that makes it easy for everyone to communicate and feel like they are on the same team. Externally, the new entity should appear integrated absolutely as soon as possible. Shared email and phone systems are a couple of quick wins in this category, but the website is the big thing here. Depending on the nature of the businesses being merged, this could represent a large redevelopment effort, however, a staged approach is a good way to tackle this. Start off with a quick project to either brand the acquired site or to redirect the acquired site to the main site. You can then follow along with the full project to redevelop the main site to reflect the new, combined entity.
- Organizational Efficiency – this category of tasks represents most of the work but also is where a tremendous amount of the anticipated synergies will be realized. It includes systems such as ERP, CRM, HR systems, etc.., each of which is a significant project unto itself. To determined the best approach, it is important to start with an in-depth and independent assessment of the current systems in place in each entity to determine requirements, capabilities, and effort to convert. And don’t always assume that the acquiring company’s systems should be the ones that win out. Either way there is a significant conversion effort at hand, so maybe there is an opportunity to replace an internal system that you have been struggling with – either with the corresponding system already in place with the acquired company or maybe even one that is new to both.
- Technical Efficiency – many tech teams will jump to the items in their world as the place to start after the acquisition. While there is certainly inefficiency in different hosting facilities, different helpdesk tools, and different remote desktop support tools, that inefficiency is mostly limited to the IT team and does not impact the rest of the organization. This is why this category of tasks should be last. To do this work last may require carrying additional IT personnel longer than planned, but it is worth it in order to get the combined business operating efficiently as the new entity as quickly as possible.
Integrating Products and Product Development Teams
If the acquisition is bringing together companies with either competing or complementary technology products, there were synergies anticipated in bringing the deal together. To realize those synergies will require many difficult decisions and development efforts to make the products in question work together.
However, unlike the “core” tools and systems outlined above, there is tremendous passion and pride of authorship around internally developed systems. And to make matters worse, since you have to figure out organizational issues as well (including potential elimination of positions), it is very difficult for employees to separate themselves from the emotion to provide objective input. This is why is it critically important to get outside help to do an independent assessment of these systems and the teams supporting them to help determine the plan forward.
There are multiple important questions to be answered such as:
- Which product(s) should be sunset?
- Who will lead the combined team?
- What does the new IT/Product Development organization look like?
- What toolset (Agile PM, defect tracking, build & release, etc…) will the combined team use?
- Which customers will be migrated to other systems?
- What is the right technology stack moving forward for the combined entity?
- Should the systems be integrated at all?
- Etc, etc etc…
Furthermore, it is important that these decisions not be driven just from a technical perspective. Technology people focus on technology solutions which may not be the right thing for the business. As an example of this, I was recently working with a company that acquired another company that provided the missing piece of an overall solution they needed to compete effectively in the market.
Shortly after the acquisition, the technology team determined that the effort to integrate the two platforms wasn’t that much less than the effort to build the acquired functionality into their existing platform. And since having a single system with a shared UI, DB, technology stack, and development team was “better” for the company, that was the path that was chosen. Needless to say, the redevelopment of the acquired platform was far more complicated than anticipated and the team also underestimated the effort required to support both systems during the effort. So, after 18 months, not only do they not have the new functionality they made the acquisition for, their existing product and customers have suffered because their focus has been on this redevelopment effort. None of the anticipated benefits of the acquisition have been realized. If, however, the approach had been to loosely integrate the two applications (SSO, Billing, UI refresh, etc…), those benefits could have been realized within a few short months while still keeping existing customers happy. While perhaps not the best “technical” decision, it would have certainly been the best decision for the business.
Fortunately, the acquisition integration risk can be greatly reduced by bringing on the right leadership. TechCXO has partners with extensive experience in the area of systems and technology integration that are ready to help you make your merger successful.