Mergers and acquisitions (M&A) provide both opportunities and challenges for businesses. The major ones draw lots of attention often for an extended period of time, putting top executives – including CIOs – in the spotlight to ensure a smooth transition.
For example, at SDxCentral two of the most popular topics among our readers are Broadcom’s acquisition of VMware and HPE’s pending acquisition of Juniper Networks While not all M&As are marque deals, they offer opportunities for growth and expansion, they all also require significant time, resources and careful planning.Whether it’s to acquire new technology, a workforce skilled in a specific area, a new sales channel, business opportunities are, of course, the reason for M&As.
For CIOs, M&A activities can present a paradoxical dilemma. Early involvement is crucial for successful integration and adding value, but it can also drain IT resources with uncertain outcomes. For CIOs to optimize their involvement in M&A deals, ensuring their contributions are impactful and aligned with the business's strategic objectives. Of course, CIOs and their teams aren’t in positions to quit their day jobs.
In its recent report, How to Enhance the CIO’s Role in M&A Deals, Gartner analysts Andy Rowsell-Jones, Mark Carrol look at that M&A dilemma for CIOs – one that requires early involvement for planning and synergy yet brings significant time and resource commitments.
CIOs walk an M&A tightrope When CIOs are engaged early on they have the opportunity to identify potential IT integration challenges and opportunities, develop an IT integration strategy and contribute to cost-benefit analyses and synergy realization, according to Gartner.
However, getting involved too early in deals that end up falling apart drain IT resources. CIOs must carefully consider the potential value of each deal before committing their time and personnel.
Garner’s framework for CIO involvement To help CIOs decide when to get involved in M&A deals, Gartner proposes that CIOs use a decision framework based on five key criteria:
- IT’s role in deal value: How critical is IT to achieving the deal's expected cost and revenue synergies?
- Strategic fit: How well does the M&A align with or impact the current IT and business strategies?
- IT risks: What are the inherent IT risks associated with the deal, and how manageable are they with early IT involvement?
- IT resource availability: Does the IT department have the resources necessary to participate in the deal without neglecting other priorities?
- Deal completion likelihood: How likely is the deal to be finalized?
3 phases where CIOs add value to the M&A lifecycle Early CIO involvement can benefit M&A deals throughout the entire lifecycle, from strategy to integration. Here are some specific phases where CIOs can add value:
- M&A strategy
- Identify acquisition targets based on IT integration capacity and cost estimates.
- Assist in due diligence by evaluating the target's IT infrastructure and digital capabilities.
- Contribute to the business case by assessing the IT and digital asset value.
- M&A transaction execution
- Conduct technology due diligence to identify potential risks and opportunities.
- Help refine the business case by identifying IT cost synergies.
- Participate in planning the integration of IT systems and digital assets.
- M&A integration
- Develop an IT/digital integration strategy aligned with overall M&A objectives.
- Lead the integration of IT infrastructure and technology platforms.
- Implement governance frameworks to ensure smooth integration.
- Track progress and measure the success of IT integration initiatives.
How CIOs can best engage with M&A deals By strategically engaging in M&A deals and leveraging their expertise, CIOs can play a pivotal role in ensuring successful integration and value creation. The decision framework and areas of value-add outlined in this article provide a roadmap for CIOs to optimize their involvement in M&A activities and contribute to the overall success of their organizations