IT Leadership
IT leadership’s role in the transaction process when the business is engaging in an M&A sale or divestiture.
IT is often not involved in the M&A transaction process. When it is, it’s often too late.
IT has always been an afterthought in the M&A process, often brought in last minute once the deal is nearly, if not completely, solidified. This is a mistake. When IT is brought into the process late, the business misses opportunities to generate value related to the transaction and has less awareness of critical risks or inaccuracies.
To prevent this mistake, IT leadership needs to develop strong business relationships and gain respect for their innovative suggestions. In fact, when it comes to modern M&A activity, IT should be the ones suggesting potential transactions to meet business needs, specifically when it comes to modernising the business or adopting digital capabilities.
IT needs to stop waiting to be invited to the acquisition or divestiture table. IT needs to suggest that the table be constructed and actively work toward achieving the strategic objectives of the business.
Don't hesitate to contact us before the due diligence phase for further discussion. Do you know how good their systems are?
Performing IT due diligence is essential to ensure that you are receiving the expected value and that the systems are suitable for both current and future business needs.
After a transaction is completed, IT services play a crucial role in integration, development, problem-solving, and forward planning. Our team is here to assist you with all of your IT needs.
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The changing M&A landscape
When the pandemic occurred, businesses reacted by either pausing (61%) or completely cancelling (46%) deals that were in the mid-transaction state (Deloitte, 2020). The uncertainty made many organisations consider whether the risks would be worth the potential benefits. However, many organisations quickly realised the pandemic is not a hindrance to M&A transactions but an opportunity. Over 16,000 American companies were involved in M&A transactions in the first six months of 2021 (The Economist). For reference, this had been averaging around 10,000 per six months from 2016 to 2020. In addition to this transaction growth, organisations have increasingly been embracing digital. These trends increase the likelihood that, as an IT leader, you will engage in an M&A transaction. However, it is up to you when you get involved in the transactions.
Risk & challenge
The most important driver of an acquisition is the ability to access new technology (DLA Piper), and yet 50% of the time, IT isn’t involved in the M&A transaction at all (IMAA Institute, 2017). Additionally, IT’s lack of involvement in the process negatively impacts the business: Most organisations (60%) do not have a standardised approach to integration (Steeves and Associates), let alone separation. Two-thirds of the time, the divesting organisation and acquiring organisation will either fail together or succeed together (McKinsey, 2015). Less than half (47%) of organisations actually experience the positive results sought by the M&A transaction (Steeves and Associates). Organisations pursuing M&A and not involving IT are setting themselves up for failure.
Common obstacles
IT is rarely afforded the opportunity to participate in the transaction deal. When IT is invited, this often happens later in the process where separation will be critical to business continuity. IT has not had the opportunity to demonstrate that it is a valuable business partner in other business initiatives. One of the most critical elements that IT often doesn’t take the time or doesn’t have the time to focus on is the people and leadership component. IT waits to be invited to the process rather then actively involving themselves and suggesting how value can be added to the process.
Facts about IT solutions in M&A
47% of senior leaders wish they would have spent more time on IT due diligence to prevent value erosion. Source: IMAA Institute, 2017
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​“Solutions exist that can save well above 50 percent on divestiture costs, while ensuring on-time delivery.” Source: SNP
Merger
A merger looks at the equal combination of two entities or organisations. Mergers are rare in the M&A space, as the organisations will combine assets and services in a completely equal 50/50 split. Two organisations may also choose to divest business entities and merge as a new company.
Acquisition
The most common transaction in the M&A space, where an organisation will acquire or purchase another organisation or entities of another organisation. This type of transaction has a clear owner who will be able to make legal decisions regarding the acquired organisation.
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