How CIOs can help techquisitions succeed

Many of our clients come to us because they need help integrating their messaging and applications after a merger or acquisition. They tend to acquire companies for many different reasons. But these days, there is a unique scenario we’re starting to see more often: techquisitions.

Gartner coined this term to describe those times when a company in a more traditional, non-digital industry (like insurance, retail, automotive, or healthcare) acquires a smaller, more advanced digital firm. The goal: accelerate the larger firm’s digital transformation.

Techquisitions can help you:

  • Innovate on new ways to do business in your industry
  • Drive more digital sales and digitize other customer interactions
  • Expand and digitize your enterprise value chain
  • Acquire scarce digital talent
  • Monetize data and analytical insight

But you will get these benefits only if you handle the acquisition carefully. If you are unable to  integrate the company in the right way, it wastes money and time. And it will damage your organization’s credibility and the opportunity itself. Here are some things CIOs can do to help techquisitions happen as smoothly as possible.

Start getting ready now

Even if there is no techquisition on your horizon, you can take steps to get ready. Because chances are, you will be involved in one of these someday soon. So watch what’s happening in the digital areas you are interested. Formalize this by setting up a working group that meets once a month or quarter and talks about a) the digital capabilities you need and b) what is happening out in the market in these areas.

Also, start training or recruiting people with key digital capabilities, like data science and machine learning. That way, you will have qualified people on staff who can help evaluate potential acquisition targets more effectively.

Finally, get your IT team and systems ready to scale new ideas that might come in from the techquisition. This might mean renovating your legacy, monolithic applications. Or tweaking your team culture to be more open to change.

Spend more time up front

We talk a lot about IT getting involved as early as possible in M&A scenarios. And for techquisitions, that is even more important. IT should have a seat at the decision table, even well before the deal is inked.

Gartner says that the typical M&A deal phases are these:

  1. Scouting (opportunity analysis, buy vs. build, identify candidates)
  2. Due diligence (assess the target, outline the integration plan)
  3. Welcome and initial integration (mandatory steps, integration quick wins)
  4. Main integration (bulk of merger activities, often over many months)
  5. Reap the benefits (lessons learned, driving out benefits)

In a traditional M&A scenario, CIOs tend to spend more of their time on steps 4-5. The main integration can take months or years. But for techquisitions, CIOs should spend a bulk of their time on early scouting and due diligence and less time on later activities like integrating IT systems.

Your job as CIO is to help guide your executive team around what digital capability to go after (steps 1-2). You should help them choose the right target, a digital firm with practices and systems that complement yours. If you are in a more established, traditional industry, your formal processes can easily clash with a digital target’s more agile, informal ways of doing things. Some disconnect is to be expected. But if you are too far out of sync—or if the company won’t really bring the capability you need—then your techquisition is much less likely to show value.

Preserve the digital firm’s DNA

In traditional acquisitions, the larger firm usually absorbs the smaller one. You look across both organizations and roll out your own IT systems and ways of doing things on the firm you have acquired. But for a tecquisition, this traditional approach would be counter-productive.

You might not need to harmonize systems and processes across the two organizations. In fact, you usually want to do the exact opposite. You might choose to skip the full integration entirely or do more of a lightweight integration. This gives the techquisition breathing room to continue innovating—and help you innovate, too. To do this, you can set up a dedicated “digital business incubator.” This can be a separate entity or dedicated division of the acquiring firm.

Engage an expert

Even if you decide not to fully merge the two entities, you still need them to be able to collaborate. You will need at least a lightweight integration of your email, address list, and more. This is a great opportunity to engage an expert like Binary Tree to make that happen.

My team offers end-to-end M&A solutions in we can do as much (or as little) integration as you need. For example, we can help you plan for a smooth day 1 and set up a global address list so the two organizations can collaborate. Later, if you decide to merge IT systems in some way, we’ve got you covered on that scenario, too.

To find out more, get in touch. We look forward to helping you get the most from your next techquisition.


Source: Gartner. The CIO's Role in Successful Techquisitions. August 2017.