April 05, 2001, 7:04 PM — Mergers and acquisitions are big business, but they're also a dangerous business. Obstacles can arise at every juncture, as Ariba and Agile, Verizon and Northpoint, and Novell and Cambridge discovered recently. As the tech economy continues to expand and diversify, companies will keep merging with and acquiring other businesses in order to quickly incorporate new technologies and tap new markets.
IT used to be the cleanup department, left to patch things together in the aftermath of a merger or an acquisition. But as companies begin to reevaluate the role technology plays in their business, IT has been promoted to a strategic decision-making player.
What does this mean? First, IT professionals need to know how to evaluate which companies are most compatible with the existing systems and operations of their own company. The next step is to factor in business goals and see how the technical prowess of the combined entity supports these goals and objectives.
But be forewarned: One of Murphy's laws states that even with the most stringent diligence, unanticipated problems will rear their ugly heads. And guess who will be responsible for the cleanup? The process of bringing together two companies (not to mention subsidiaries, partners, and third-party vendors) is delicate and calls for both stellar management skills and deep technical knowledge. The key to systems and operations integration is communicating with executives and employees, while keeping the larger business and technical objectives in mind at all times.
In the case of mergers, this means working closely with teams from both parties and focusing on true integration. While it might seem appealing to cut and paste a bit from each company or let one party rule the coop, the most successful mergers use the full resources of both companies to create a single, stronger unit.
The ultimate goal of acquisitions, on the other hand, is consumption -- often used as a growth strategy. For many businesses, acquisition integration means absorbing the new units as quickly as possible by implementing a single system across the board. To oversee acquisitions, managers need keen project management skills that will help them organize employees and technologies within a short time frame.
Whether it's merging or acquiring, a company needs management that knows how to integrate and implement information technology.
M&A strategies:
Advice to merger makers: Mergers always look good on paper. Making them work is another story, and the management of information technology is increasingly critical to a merger's success.
Finding the time bombs: Sizing up another company's IT systems before signing a merger or acquisition deal is difficult, but there are ways to spot time bombs and to determine whether all those IT cost savings the CEO is promising are really attainable.
Winning strategies: Not long ago, IT handled only complex system integration issues and other technical dilemmas that arose when two entities became one. Today CTOs and other tech executives develop and implement merger and acquisition strategies, which translate into revenue and growth strategies.
Mergers require financial expertise: Technical executives are joining the business development team and becoming involved in the early stages of merger and acquisition activity.
Managing mergers:
Merge right: Acknowledging that the transition is tough is the first step toward coping with the changes brought on by a merger. Learn the steps to merging the right way.
Compensation culture clash: Issues about the personal impact of merger-and-acquisition activities must be dealt with alongside salary and benefit issues for IT employees, or your workers will jump ship in droves.
When startups merge: Having run out of cash and good will, many technology start-ups have no options other than selling or merging. But putting two struggling start-ups together requires a precise approach.
Merger management: Learn how Time Warner CTO Michael Dunn is implementing the AOL-Time Warner merger.
Managing acquisitions:
