How Savvy CIOs Get Involved Earlier in M&A PlanningJune 5, 2018
Don’t wait until your executives bring an M&A to you.
Bring an M&A process to your executives.
Here's a scenario we often hear from our clients: An enterprise technology team partners with Binary Tree to help migrate users after a recent merger or acquisition (M&A). Unfortunately, technology leaders were not involved in planning or choosing the acquisition target. Instead, they found out about the merger along with everyone else. Now, they are scrambling to do their due diligence and make sure their systems are set up to help everyone work together on Day 1 and beyond.
Because we at Binary Tree do mergers day in and day out, we are always happy to help with merger scenarios like this on tight timelines. And given how common M&As are becoming in this digital age, it is becoming clear that technology leaders need to take a new approach.
The trick is to not wait until the M&A comes to you. By the time the deal is inked, it can be too late for technology leaders to add maximum value. A better strategy is to assume that an M&A is a given in the coming years. That way, you can take a series of proactive steps to get ahead of the curve and help steer the conversation. Your goal should be to get a seat at the table at any planning discussions for the next merger. Here are some ideas to get there.
Use hypothetical models
Start talking early with your executives about hypothetical M&As. Well before a merger takes place, you can be thinking about how an acquired organization might fit in with yours. Obviously, you won’t know the details until you have a specific target in mind. But you can use a few general planning models to help guide your search process and ask the right questions.
Here, I’ve summarized three useful models from Gartner:
Explore how a merger might affect your entire ecosystem, including your suppliers, customers, partners, regulators, and more. You look at what’s going on around you and start thinking about how an M&A could factor in. How will your merger affect your entire ecosystem? Are your competitors, customers, and suppliers evolving? Are there many new startups entering your space? How might they disrupt you? How could you use an M&A to disrupt first?
Business canvas model
Look at how your organization might need to change to absorb a new business. You’re looking for places to increase revenue and reduce friction and costs. The idea here is to come up with ways to evaluate if a potential acquisition is compatible with your people, culture, and strategy. As an example, take your approach to managing customers. What other approaches are compatible with yours? Which ones might conflict?
Business capability model
Define what your organization does and how you stand out from your competitors. Then look for places where an acquisition could strengthen your capabilities—or help you develop new ones. Some questions to ask: Are you doing as much for your customers as you want to? If not, how can you get there? And by when do you want to get there? Three years? Five years?
Create & socialize a reusable M&A playbook
Technology teams are often highly skilled at taking a request from the business and coming up with the required strategies, requirements, and challenges. You can take this skill and apply it to mergers, too.
The modeling work you do above can easily lead to a repeatable process. Put together an M&A playbook that describes how your technology team approaches a merger. Document common factors, risks, or challenges that can speed—or impede—the merger. Then make sure to socialize this resource with your executives.
Examples of things to think about:
- Which technology systems are most compatible with yours? Will you need to get everyone on the same platform? If so, what’s the level of effort and timeline to integrate common systems?
- Does the target have relatively high security? If not, how might their level of security pose a risk to your organization?
- Does the target use different data definitions? How might these affect your goals for cross-selling or vertical integration?
- Is the target’s system portfolio evolving or static? If it’s static, why? Are there bigger issues here, like outdated, inconsistent processes or dysfunctional business controls?
Explore techquisitions to speed digital transformation
Another way to not get caught flat-footed on your next merger is to be the one leading the charge. If your organization needs to get up to speed in the digital age, the technology team should absolutely help seek out the right techquisitions. Be talking to your executives about their goals and how you can help.
Some questions to ask:
- What are the specific drivers behind this techquisition?
- Could you build this digital capability yourself or not?
- How soon do you expect to see value from the techquisition? Is that realistic?
- How might this techquisition affect your ecosystem?
- What factors make a target particularly desirable?
- How would your business need to change to support a techquisition?
Engage an expert
More than 50% of organizations reach out for technology help with a merger (Gartner). That’s because M&As tend to happen infrequently and need to move quickly. So it’s a great opportunity to bring in a seasoned partner like Binary Tree who can help smooth the process.
Perhaps you’re putting together your playbook for a hypothetical M&A. Or you’re in the throes of getting ready for a looming Day 1. Whatever your scenario, we at Binary Tree are standing by to speed your merger. My team offers end-to-end M&A solutions that can help you:
To find out more about how we can help, get in touch. We look forward to working with you on your next merger.
Source: Gartner. Use Modeling to Ensure Early CIO Involvement for M&A Success. December 2016.