December 12, 2000, 11:03 AM — AS IPO DREAMS WITHER, mergers and acquisitions continue to shake up the business
landscape, and CTOs are the driving force behind much of the M&A frenzy. This comes
as no surprise given the increased importance of technology in today's business
landscape.
Not so long ago, IT execs found out about their company's latest corporate marriage
after the paperwork was inked and the lawyers sent home. IT did the cleanup, handling
complex system integration issues and other technical dilemmas that arose when two
entities became one.
Today CTOs and other tech executives sit on the M&A front lines. They've
established themselves as key players on corporate teams, charged with developing and
implementing merger and acquisition strategies, which translate into revenue and growth
strategies.
Whatever the reason for a company's M&A campaign -- be it to obtain new
technologies and products, extend the customer base, or grow a Web audience -- IT
leaders need to be involved in the identification of targets and the numbers behind the
deal. They must be business drivers and establish market leadership, says Rick Hartt,
vice president of architecture and engineering for netASPx, an ASP (application service
provider) in Herndon, Va.
Leading an aggressive growth strategy
Hartt and other execs at the fast-growth ASP use acquisitions as an avenue to
obtain new technologies and tech talent. After a proposed merger fell through last
year, the ASP tore through nine deals in seven months, acquiring companies such as
Lotus Domino software developer Business Systems Development and Total Solutions Group,
a Lawson Software reseller.
Working as part of the business development team with CXOs, Hartt is part of this
M&A genesis. Hartt and the team develop a lengthy checklist detailing what the
company wants in an acquisition target. But to do that you must understand the
company's market, Hartt says. "Whom do you intend to sell your products or services to?
How will your company reach its market -- the channels of distribution: direct sales,
technology partners, services partners?"
The team marries market and needs and develops a list of attractive target
companies. Then the group identifies the best "buy" candidates. Tech execs must help
determine which of possible targets fits best with the corporate vision, Hartt says.
Hartt says as vice president of architecture and engineering at netASPx, he brings
an important element to the M&A team. Hartt is specifically prepared to articulate
the ASP's technical vision to other company execs -- to define netASPx's IT needs, from
the specific software and hardware functionalities required, to infrastructure issues
such as platforms and operating systems.
The role tech executives play in mergers and acquisitions mirrors their expanding
business role. CTO-level execs must not only be on the lookout for great technologies
but also must be aware of how a merger will boost the business value to their current
customer base.
Execs at Seattle-based networking software vendor WRQ take a long-term view of
mergers and acquisitions. For WRQ, M&A activity is customer-driven and focuses on
obtaining new technologies and expertise.
Shaun Wolfe has advice for tech execs who are new to the business development
ranks. "You need to start out with a vision of where you want to go. You need to
say, 'Here is the direction we want to take and here is what the customers' needs
are,' " says Wolfe, COO of WRQ.
Hartt sees an important distinction between IT and traditional entities. "For
technology companies ... growing and expanding through mergers and acquisitions, having
a clearly defined set of screening or selection criteria around candidate or target
technologies is absolutely essential. For companies that are not technology companies
per se, but can leverage technology as a differentiator, applying technology-based
screening or selection criteria to M&A candidates leads to much quicker realization
of the benefits of the transaction," netASPx's Hartt says.
"CTOs must understand the business drivers behind the merger and acquisition," says
Tom Oleson, a research director for IDC and author of a recent IDC report on the role
that tech execs play in mergers and acquisitions. They must act as businesspeople and
assess what value IT can bring to their organizations by showing how IT can make the
merger more profitable, Oleson says.
