The role of IT in the M&A processThe role of IT in the M&A processSteve Anderson Dip Mgmt MCMI FIMIS FBCS CITPSteve Anderson Dip Mgmt MCMI FIMIS FBCS CITP

AgendaAgenda

• Mergers vs. AcquisitionsMergers vs. Acquisitions• Involvement of the IT teamInvolvement of the IT team• People implicationsPeople implications• On the hunt – Micro Warehouse Inc.On the hunt – Micro Warehouse Inc.• Breaking up – Citex Group Ltd.Breaking up – Citex Group Ltd.• Common issuesCommon issues• SummarySummary

DefinitionsDefinitions

• A MergerA Merger““The joining of two companies”The joining of two companies”““Two or more companies combined to achieve greater Two or more companies combined to achieve greater

efficiencies of scale and productivity. This is accomplished efficiencies of scale and productivity. This is accomplished through the elimination of duplicated plant, equipment, and through the elimination of duplicated plant, equipment, and staff, and the reallocation of capital assets to increase sales staff, and the reallocation of capital assets to increase sales and profits in the enlarged company.”and profits in the enlarged company.”

““The absorption of one corporation by another.”The absorption of one corporation by another.”

• An AcquisitionAn Acquisition““Acquiring control of one corporation by another.”Acquiring control of one corporation by another.”““One company taking control of another by purchasing a One company taking control of another by purchasing a

majority or all of the target company's outstanding shares.”majority or all of the target company's outstanding shares.”““The act of one company taking over controlling interest in The act of one company taking over controlling interest in

another company.”another company.”

Mergers vs. AcquisitionsMergers vs. Acquisitions

• What’s the difference?What’s the difference?• Mergers = absorption & eliminationMergers = absorption & elimination• Acquisitions = control & ownershipAcquisitions = control & ownership

• Strategic, opportunistic or necessity?Strategic, opportunistic or necessity?• The people perspectiveThe people perspective

• ““It’s a merger…”It’s a merger…”• ““It’s an acquisition…”It’s an acquisition…”

• Increasing risks – increased securityIncreasing risks – increased security• Speed is of the essenceSpeed is of the essence

The role of the IT teamThe role of the IT team

• It depends…It depends…• Business support function?Business support function?• IT integral to product or service?IT integral to product or service?

• A seat at the tableA seat at the table• Profile, credibility and experienceProfile, credibility and experience• Mission-critical ITMission-critical IT• Day 1 changesDay 1 changes• Domains and emailsDomains and emails• Full integrationFull integration

Steps in the process and IT involvementSteps in the process and IT involvementTA

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Impact on the IT teamImpact on the IT team

MERGERMERGER• Usually negativeUsually negative• Less involvementLess involvement• Low controlLow control• Low moraleLow morale• Low riskLow risk• Low job securityLow job security

ACQUISITIONACQUISITION• Usually positiveUsually positive• More involvementMore involvement• High controlHigh control• High moraleHigh morale• High riskHigh risk• High job securityHigh job security

Example: Micro Warehouse Inc.Example: Micro Warehouse Inc.

• $1.7bn global mail-order computer and $1.7bn global mail-order computer and peripheral resellerperipheral reseller

• Expanding rapidly throughout Europe by Expanding rapidly throughout Europe by acquisitionacquisition

• Dedicated European IT team establishedDedicated European IT team established• Small amount of due diligence beforehandSmall amount of due diligence beforehand• Implemented global standard sales order Implemented global standard sales order

system, email and data networkssystem, email and data networks• Migrated all SKUs and customer data across Migrated all SKUs and customer data across

along with manual data entryalong with manual data entry• Localised system for country accounting Localised system for country accounting

rulesrules

Example: Citex Managed Services LtdExample: Citex Managed Services Ltd

• £120m managed services business£120m managed services business• Merged with Carillion plcMerged with Carillion plc• Involved early in processInvolved early in process• Placement options for key staffPlacement options for key staff• Led transition planning – collaborationLed transition planning – collaboration• Flawless execution and migration – domains, Flawless execution and migration – domains,

email, servers, dataemail, servers, data• After-shock and falloutAfter-shock and fallout• Close the doorClose the door

Common IssuesCommon Issues

• Lack of senior management Lack of senior management understandingunderstanding

• Lack of visibilityLack of visibility• IT involved too late in the processIT involved too late in the process• Limited valuationsLimited valuations• Impossible timeframesImpossible timeframes• Openness and honestyOpenness and honesty• Communication is keyCommunication is key• Lost intellectual capitalLost intellectual capital

SummarySummary

• Prepare for a merger or acquisitionPrepare for a merger or acquisition• Experience is the best teacherExperience is the best teacher• Establish a high profile and strong Establish a high profile and strong

personal credibility at board levelpersonal credibility at board level• Demonstrate leadershipDemonstrate leadership• Support your teamSupport your team• Appropriate incentivesAppropriate incentives• Professionalism pays dividendsProfessionalism pays dividends