Inside Post-merger Integration (9): IT Integration

In part 7 of my series on PMI, I have discussed common integration sequencing, namely integrating straight-forward backoffice functions like Finance & Accounting first, followed by core functions, for example Sales & Marketing. IT seems to fall through the cracks. It shouldn’t.

First things first: If an IT business acquires another IT business, obviously IT is anything but infrastructure: It is the very core function. In the PMI scenarios I am looking at, IT is merely an enabler: It’s the backbone of any standard industrial manufacturing business, and also for most service providers, for banking and insurance firms. Without IT, there are no business systems, there is no ERP, no management of complex projects, and no communication, neither by email nor by phone. IT for many businesses is vital. Touching IT systems, switching platforms, or even releases, can be a very demanding project, in terms of risk, resources human and financial, while the immediate reward seems limited. Still, there is a reward, and a common IT platform may not fuel growth in the long run, but at least a fragmented IT environment does not limit growth either.

So, where to begin? I recommend going to back to the TOM (Target Operating Model) – or, as I like to call it: The Holy Grail of integration. The TOM dictates integration targets and sequence. If any of these targets are linked to specific IT systems, the acquirer will know which ones need changing, upgrading, or integrating. The focus should be on those systems only which support delivery of the TOM, and hence enable delivery of the strategy.

Rule #9: Integrate IT systems linked to implementation of the TOM only.

Standardizing any other systems in future still has its merits, but there is no immediate need to act. Rather than making non-strategic IT systems a part of the post-merger integration program, they should be tackled for renewal and harmonization in context of their standard product life cycle.

However, in course of the PMI process a couple of IT-related steps should be taken in any case: The new IT strategy should reflect the new combined companies’ strategy. Future requirements on IT systems will also determine what kind of workforce will be needed. A combined IT organization may require less or differently qualified staff. In addition, contracts and license agreements should be checked, and the server and service environment reviewed for harmonization and saving potential.

This is the last article in my column on post-merger integration. Thank you for visiting an reading.

Diethard Engel is an independent consultant and interim manager, focused on Business Transformation, Post-merger Integration / Carve-out and Executive Finance. He has run multiple post-merger integration/carve-out projects for international businesses.