Mergers_and_acquisitions_IT_strategy

“Money money money money money!”

Not only is this how the O’Jays’ hit song “For the Love of Money” begins, it’s also the aspect most companies zero in on when considering a merger or acquisition. With so much focus on the purchase price and buyout, it isn’t until after the ink dries that staff begin to sort out the details not previously considered – like technology.

But hardware, software and platforms are the core of daily business operations. To achieve post-merger growth, the IT strategy for the new company needs to be given thoughtful consideration.

The earlier you start planning, the better.

Based on our work with clients in Minneapolis and St. Paul there are 4 challenges companies going through a merger or acquisition can expect and 4 best practices merged businesses should follow.

4 Merger and Acquisition IT Challenges

Here are the top 4 issues we see clients experience. With foresight, you can be prepared.

Challenge 1: Platform and Data Integration

Two companies, even in the same industry, often have different systems and procedures. One company can operate entirely in the cloud while the other relies on on-premise hardware and software.

You may decide to quickly switch everyone over to a core application such as email but specific line-of-business software can be more complex and require thorough planning. While you sort out the process, the business will continue using two platforms.

There are technology and operational reasons for delaying a change. On the technology side, it is difficult to merge data from two different systems. In some cases, it isn’t possible to merge all the data and you’ll have to maintain an old platform so you can access the information as needed.

Operationally, waiting gives your employees more time to become accustomed to the new systems and business processes. For instance, financial systems may be kept separate until employees have a higher degree of confidence in using the application or the two companies’ bookkeeping is integrated.

Typically, merged companies operate from different platforms for about a year but it can last longer depending on the complexity of the software. If the merger occurs in the middle of the year, it may make sense to wait until the end of the fiscal year to migrate your data.

Challenge 2: Extra Equipment

When we advise clients going through a merger or acquisition on their technology, they often wonder what to do with the hardware at the company being acquired.

To the business owner who purchased another company, the acquired organization’s devices are unnecessary and have little value. The company that was acquired may feel differently, especially if they recently invested in new equipment and see value in it.  

In our discussions, we tell clients hardware is like a car. As soon as you start using a device, it begins to depreciate. There won’t be much resale value, and it makes more sense to retain devices such as PCs and firewalls as spares. Extra servers may be used for backups.

Challenge 3: Security and Procedures  

Specific security challenges will depend on how the two companies operate and the post-merger plans. For instance, if there will be two separate offices, you’ll need to ensure there is a secure way to remotely access data.

Review the current security environments and networks. Ensure all employees are aware of the best practices they need to follow and steps they can take to prevent external threats. You can easily achieve this by having IT standards and policies in place. 

When maintaining separate offices, you may need to upgrade firewalls at one or both locations to ensure compatibility, functionality and security.

Challenge 4: Resistance to Change

It’s human nature to resist the change required to accommodate the needs of the new company. Staff will want to continue doing what has always worked.

Rather than making drastic technology changes immediately, focus on integrating the cultures. Plan about a year for the transition period and have people work side-by-side to get comfortable.

For instance, one bookkeeper may need to keep two sets of books to maintain current operations while learning the new system. Or, sales reps from the two companies may continue to use their respective CRM software. Staff from each company may continue to use the line-of-business applications with which they are most familiar.

4 Merger and Acquisition IT Best Practices

Following these 4 best practices will lessen the number of problems you encounter.

1. Expect Problems Related to People – Not Systems

People will push back against change, creating unforeseen problems. Count on a minimum one-year transition timeline and focus first on bringing the two organizations together culturally. Then start changing software and applications.

When you make technology changes, we recommend you provide training for employees before rolling out a new system. An IT expert can help with the integration and answer any questions.

2. Overcommunicate

Change will occur. Cut down on resistance by providing clear, transparent updates to staff. It will ease anxiety and provide valuable information about new requirements and technology.

3. Plan to Run Systems Side-by-Side

In the short term, this may seem like it complicates matters. But the benefits outweigh the costs in the long run because it gives your employees a chance to settle in, adjust to new circumstances and learn how to use different platforms.

It’s also an opportunity to evaluate which software applications and business processes offer the best fit for the company. For example, one organization may be using productivity-boosting apps you want to leverage.

4. Save Extra Equipment for Backups

Since hardware doesn’t retain value, the best ROI will be to use any extra equipment as backups and spares.

Mergers and acquisitions are already complicated and waiting too long to think about technology makes the process even more complex. An IT expert will help you manage the process by integrating your systems, providing staff training and conducting security reviews.

Contact us at (952) 258-8200 or online to learn more about preparing a merger and acquisition IT strategy for your small business.