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1113 June, 200613 June, 2006
IT & M&A – A Problem or an IT & M&A – A Problem or an Opportunity?Opportunity?
Research FindingsResearch Findings
Presented by F. VielbaPresented by F. Vielba
BCS Consultancy Group EventBCS Consultancy Group Event
13 June 200613 June 2006 22
AgendaAgenda
• Key points from the researchKey points from the research
• What should CIO’s do when facing an What should CIO’s do when facing an M&A?M&A?
• Future trendsFuture trends
13 June 200613 June 2006 33
Key Points from the Key Points from the researchresearch• M&A is increasingly a part of CIO lifeM&A is increasingly a part of CIO life• IT is more central to the business so the IT is more central to the business so the
stakes are higherstakes are higher• M&A poses significant technical challengesM&A poses significant technical challenges• M&A calls for well-developed management M&A calls for well-developed management
skillsskills• IT needs to be involved in the M&A process IT needs to be involved in the M&A process
from the beginningfrom the beginning• Because M&A is growing companies need to Because M&A is growing companies need to
get better at learningget better at learning
13 June 200613 June 2006 44
Number of deals
1900 2005TIME
Number of Deals
1905 2005
0
10,000
M&A Activity over time (last 100 years)
. . . In waves which coincide with economic activity
Illustrative only
13 June 200613 June 2006 55
UK Scene – Cross Border UK Scene – Cross Border AcquisitionsAcquisitions
020406080
100120140160180
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
UK CO's FOREIGN
In £
billion
s
Source: FT, February 8 2006
13 June 200613 June 2006 66
Victor mentality
Victor mentality
Flawed rationale behind merger
Flawed rationale behind merger
Lack of post-deal
acquisition plan
Lack of post-deal
acquisition plan
The pitfalls are clearly sign-The pitfalls are clearly sign-postedposted
Focusing only on the financial arrangements
Focusing only on the financial arrangements
Lack of strategic
fit
Lack of strategic
fit
Inadequate
pre-deal plans
Inadequate
pre-deal plans
Lack of understandin
g cultural sensitivities
Lack of understandin
g cultural sensitivities
Lack of knowledge of target
prior to deal
Lack of knowledge of target
prior to deal
Acquisition targeting
was haphazard
Acquisition targeting
was haphazard
Lack of clarity in the
value creation
logic
Lack of clarity in the
value creation
logic
CEO’s whim and prejudices dictate
need for and pace of acquisition/merger
CEO’s whim and prejudices dictate
need for and pace of acquisition/merger
Underestimationof costs
Underestimationof costs
Machismo and hubris provide
the motive force
Machismo and hubris provide
the motive force
Underestimation of complexity of integration
Underestimation of complexity of integration
Lack of sponsorship
Lack of sponsorship
Lack of credibility of
implementation team
Lack of credibility of
implementation teamLack of
communication
Lack of communicatio
n
Vision not clear or not articulatedVision not clear
or not articulated
Lack of attention
todetail
Lack of attention
todetail
. . . Most of these signs apply to IT
13 June 200613 June 2006 77
Decision to merge or acquire
Technical issues
Company A Company B
Management issuesBusiness issues
BTM Model – Issues BTM Model – Issues EncounteredEncountered
Normal Operation
13 June 200613 June 2006 88
Prior M&A experience
M&A strategy
M&A target
M&A decision
M&A implementation timetable
IT Strategy within the business
Role of IT in the business
Role of IT in the M&A team
Due Diligence
Management of the M&A process
IT is more central to the IT is more central to the businessbusiness
So the stakes are higher….
Business
Context
13 June 200613 June 2006 99
M&A poses significant M&A poses significant technical challengestechnical challenges
Centralised/decentralised
In-house versus packages
Lack of standard systems
Incompatible technology
Untested technology
Data migration
Interface problems
Scalability
So ensure that your team has the right technical skills …
IT
Context
13 June 200613 June 2006 1010
M&A calls for well developed M&A calls for well developed management skillsmanagement skills
Delivering the IT synergies
Creating a shared vision
Leading the change
Planning and Organizing
Selecting the M&A IT team
Retaining key skills
Dealing with cultural issues
Managing communications
Dealing with suppliers/customers
Doing the review process and learning points
So ensure that you are well equipped for the journey …
Management
Context
13 June 200613 June 2006 1111
Due Diligenc
e
I WILL CONCENTRATE ON THE FIRST AND LAST PHASES THE OTHER SPEAKERS WILL TALK ABOUT THE MIDDLE
TWO PHASES
Phase Model Phase Model
PHASE 1
Detailed Assessmen
t
Integration Review
PHASE 2 PHASE 3 PHASE 4
13 June 200613 June 2006 1212
IT needs to be involved from IT needs to be involved from the beginningthe beginning
• To provide business continuityTo provide business continuity• To estimate the technical risks and costsTo estimate the technical risks and costs• To enable business synergies To enable business synergies • To play an active business roleTo play an active business role
So ensure that your CEO understands that…
13 June 200613 June 2006 1313
Companies need to get better Companies need to get better at learningat learning
• To avoid costly mistakesTo avoid costly mistakes
• To beat the competition in a M&A bidTo beat the competition in a M&A bid
• To be successful To be successful
• To avoid disappointments To avoid disappointments
So ensure that your company has a process to do that …
13 June 200613 June 2006 1414
What should CIO’s do?What should CIO’s do?
• Have a clear IT strategy that includes M&A Have a clear IT strategy that includes M&A planningplanning
• Get the right technical and management skillsGet the right technical and management skills
• Buy the expertise if you are new in the M&A fieldBuy the expertise if you are new in the M&A field
• Adopt a structured approach and integrate Adopt a structured approach and integrate quicklyquickly
• Carry out due diligence as soon as you canCarry out due diligence as soon as you can
• Do detailed assessment and planningDo detailed assessment and planning
• Carry out a post-implementation reviewCarry out a post-implementation review
13 June 200613 June 2006 1515
Future TrendsFuture Trends
• The role of IT in M&A will grow in The role of IT in M&A will grow in importance as will the risks and importance as will the risks and opportunities for CIOsopportunities for CIOs
• Companies will adopt a more holistic Companies will adopt a more holistic approach to M&A and IT will be an integral approach to M&A and IT will be an integral part of itpart of it
• CIOs will become more adept at managing CIOs will become more adept at managing business transformation projects such as business transformation projects such as M&AM&A
13 June 200613 June 2006 1616
A problem or an A problem or an Opportunity?Opportunity?
• That depends on the approachThat depends on the approach
• For well prepared companies IT can For well prepared companies IT can represent an opportunityrepresent an opportunity
• For the “unprepared” IT can be a big For the “unprepared” IT can be a big problemproblem
13 June 200613 June 2006 1717
If you want to know more … If you want to know more …
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