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Making mergers, divestitures work for CIOs

Ali Bandukwalla, Pavel Krumkachev, Shalva Nolen and Rajat Sharma | June 13, 2008
Even the most seasoned IT executives worry about an integration's budgetary impact and recognize the advantages of quick completion.

Involve IT early in the MAD process. Many companies don't realize that IT can affect corporate valuation, and as a result, don't involve IT in MAD activity until after the deal is closed. What happens when IT is brought in too late? CIOs are simply presented with a budget and a mandate to complete the integration, eliminate overlapping systems and reduce headcount within a certain time frame. Often budgets and time frames are insufficient for the work at hand. To meet deadlines, hasty decisions may be made, and key people and critical knowledge lost.

Instead, when IT executives are involved in target selection and due diligence, they can help identify potential issues and high-cost items and uncover additional synergies the merger team may wish to pursue. Because up-front IT involvement can be critical to driving synergy value during a MAD deal, IT should be involved in creating the time lines and budgets to realize these synergies.

Establish a process for issue escalation and decision making. Speed is important in MAD projects, and effective implementations require timely decisions. Companies may benefit from a centralized mechanism for decision making and conflict resolution.

Align IT and business strategy. In many organizations, CIOs get little face time with their CEOs. In a MAD world where IT integration is so critical, frequent, ongoing communication between the CEO and CIO on strategic issues is essential to achieving and maintaining business-IT alignment. This is particularly important when you're preparing an organization for potential MAD activity. Specifically, IT must understand the company's primary reasons for engaging in MAD activity--is the company looking to achieve economies of scale, expand the product portfolio, acquire strategic assets, expand geographically, diversify, access new distribution channels, or just make an opportunistic play?

Identify key employees and a mechanism to retain them. The loss of key personnel can slow the integration or divestiture process, causing missed deadlines and unrealized synergies. Critical IT personnel often possess the knowledge and experience needed for the integration or divestiture, as well as the knowledge to keep the business running in the long term. Any MAD IT strategy needs to focus on employee retention.

Involved, Aligned IT Is Important to Thriving in a MAD World

MAD deals are complex, and effectively tackling them is not a perfect science. However, in a MAD world, organizations and their CIOs can find ways to help deal with the insanity. By involving IT early and continuously aligning it with the organization's overall objectives, many CIOs have been very effective at helping their organizations achieve short-term goals. They have also helped their organizations achieve overall business objectives by implementing the processes and programs that helped position IT departments and companies for long-term agility and competitive advantage.


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