1 13 June, 2006 IT & M&A – A Problem or an Opportunity? Research Findings Presented by F. Vielba BCS Consultancy Group Event.

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

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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

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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

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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

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Decision to merge or acquire

Technical issues

Company A Company B

Management issuesBusiness issues

BTM Model – Issues BTM Model – Issues EncounteredEncountered

Normal Operation

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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

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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

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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…

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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

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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

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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

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