3 Things to Ask When Preparing IT for a DivestitureOctober 14, 2019
When a decision to divest a business entity is made, typically it happens in a boardroom, and is kept quiet and shared with a limited audience until the deal closes. There are many good reasons to limit those 'in the know,' but if you are responsible for any aspect of IT, then there are probably better reasons for you to be included among those 'in the know' before the decision to divest is made. Good decisions cannot be made without first understanding your technology landscape and how it can make or break the deal. Advanced planning and preparing your IT for the divestiture are fundamental for success.
Here are three critical questions you need to ask before preparing your IT department for a transition:
- What are the reasons and drivers for the divestment?
Technology today is complex and an integral part of enterprise business operations, but divestments are just as complex if not more. In addition to legal implications, it often involves reworking business processes, reducing or eliminating IT platforms, transferring assets, and making staffing changes. As a starting point, it is critical that the CIO investigate and consider the implications of the proposed divestment in detail. This includes ensuring the CIO's involvement upfront in the planning and deal transaction. There are a number of reasons and drivers for divestment, and it’s crucial to the success of the process that these are understood. That is, understood not just by the business, the CFO and CEO, but also by the CIO and all of IT. Understanding what reasons and drivers exist is paramount to achieving the goals and objectives of the transaction.
- What is the IT impact and the implications of the divestment?
The IT implications of the divestment will be directly driven by the business or operational scope of the divestment. As a result, the scope and extent of what is being divested will directly drive what goes or changes, and what does not. The key is to start with a comprehensive inventory of your IT assets, personnel, systems, applications and service contracts and understanding of the current IT landscape, and then determine exactly what the divestment means to that environment. It is critical that this inventory be prepared and understood well in advance of the transaction taking place, as it will become the foundation for your separation/divestment planning.
- What should IT expect during the separation processes?
The disentanglement process can be particularly complex and usually requires conducting an exhaustive and meticulous information-gathering effort before any meaningful disentanglement activity can take place. Successful disentanglement requires identifying all business processes that span the parent company and the business to be sold. Begin by inventorying your business processes at a high level. Identify what IT assets supports the processes, and then identify what will need to change. The primary goal is to avoid business disruptions and ensure the normal operation of both entities following 'Day One.'
Mergers, acquisitions and divestitures will continue to change the face of organizations. The speed at which change occurs is accelerating, especially in the IT space. You need to be asking the right questions. The success of these transactions depends on planning and coordination across the enterprise. And in a divestiture, it is critical to begin preparation well ahead of the deal close and in advance of 'Day One.'
Binary Tree has supported thousands of enterprise mergers, acquisitions, and divestitures. We’ve worked on many complex divestment transactions around the globe. Our end-to-end enterprise solutions enable organizations to achieve their business and divestment IT goals.
To find out more about what Binary Tree can do for you, get in touch. We look forward to working with you on your next merger or acquisition.