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Transcending Enterprise Boundaries: IT consolidation in an M&A deal, By Salil Agrawal, Director, Price Waterhouse Coopers


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Transcending Enterprise Boundaries: IT consolidation in an M&A deal, By Salil Agrawal, Director, Price Waterhouse Coopers

  1. 1. Consulting Delivering Deal Value HCL Connect 2010 Transcending the enterprise boundaries IT consolidation in an M&A deal 17 Sep 2010 PwC
  2. 2. Contents Importance of IT in M&A Role of IT along the deal cycle The role of the CIO
  3. 3. Importance of IT in M&A IT and successful execution of deal A survey of 100 CEO’s*, threw up the following interesting facts: • More than half (58%) of CEO’s interviewed did not measure or use tools to control integration costs. • Half the CEOs affirm that in their next acquisition they will give added attention to the management of the expectations of employees and to the planning of operational integration (processes, people and IT). • The CEO’s most commonly mentioned the high costs in IT integration The CEO’s also pointed out that: • Uncontrolled priorities exist between critical and non-critical IT investments • They tend to ignore IT associated risks and expenditure • Management software (e.g. ERP) is not aligned to meet the needs of changes arising from the merger * PwC conducted an International survey amongst 100 CEO’s involved in deals Role of CIO in M&A September 2010 PricewaterhouseCoopers Slide 3
  4. 4. Importance of IT in M&A Implications of IT on a merger or acquisition Research consistently shows that integrating information systems is one of the top integration challenges for sizeable transactions. • IT involves the highest volume of activity over • IT involvement in the early stages of a deal the longest period of time. helps identify the magnitude of integration challenges • This volume alone increases complexity of integration • IT represents between 30 to 50% of total merger synergies • Complexity is increased by the enormous dependencies which IT has • IT usually determines the overall total time on other functions to execute its plans. span of the merger • IT plays a key role in determining the level of • Post-merger IT integration is the highest integration complexity in a merger operational risk of the merger • Loss of key IT staff is an important people risk Role of CIO in M&A September 2010 PricewaterhouseCoopers Slide 4
  5. 5. Role of IT in M&A IT plays a key role along the deal continuum Define your purpose Manage your process Validate Assess Evaluate Negotiate & Integrate Capture strategy options deal close acquisition value Pre deal Post IT due merger diligence integration Better Speed valuation and value Deliver synergy Role of CIO in M&A September 2010 PricewaterhouseCoopers Slide 5
  6. 6. Role of IT in M&A Role IT can play to make a deal successful Critical success factors for a Role of IT successful deal Early participation Pre-deal IT due diligence Identification of key IT risks, costs ,synergies and issues Fast identification of near term Identify synergies and how IT can act as an enabler opportunity areas Align IT plans & Identify IT cost saving opportunities Ensuring MIS and other reporting Day 1 IT work stream initiatives and planning mechanisms are ready IT and Finance dependencies and assign ownerships Integration Planning IT Integration Roadmap, Key IT deliverables Business Continuity Planning BCP and Disaster Recovery Planning during the transition and future stage Risk Exposure and Warranties IT Risk identification, prioritization and mitigation plans Role of CIO in M&A September 2010 PricewaterhouseCoopers Slide 6
  7. 7. Role of IT in M&A Key IT challenges in an M&A scenario Duplicate application systems and infrastructure • Each entity brings its own set of applications and technology and complexities • This leads to additive costs and geometrical increase in complexity Two distinct IT organizations with different operating methods • Increase in number of operating locations to be managed • Different processes, policies and practices for running of operations IT and business have different criteria for success • IT management aims for completion of integration projects & achieving operational stability • Business management looks for revenue and profitability synergies • Common vision of the combined company and a common agenda is usually missing IT’s integration tasks go on long after the deal is closed • IT’s workload mushrooms during due diligence and grows after the deal’s close, until systems integration or transition is complete and old systems are shut down. Role of CIO in M&A September 2010 PricewaterhouseCoopers Slide 7
  8. 8. Where does CIO fits in Role of CIO in M&A integration Deal Phases Before M&A Due diligence Post M&A • Obtain a seat on the pre-deal • Assess acquired company’s IT • Establish connectivity & team assets and develop an consolidate key infrastructure • Understand deal’s business integration strategy. aspects intent • Define the decision-making • Revalidate due diligence • Ensuring IT has the skills & structure and fill key assessments structure to manage an organizational positions • Begin vendor agreement integration project • Pull together the integration consolidation • Developing M&A integration project team • Complete any needed data principles and templates for due migrations & system integrations diligence and planning • Plan critical milestones to the lowest level of detail • Define & validate post merger goals, strategies & plans • Complete business process & system improvement • Retire ‘ low hanging’ redundant systems Role of CIO in M&A September 2010 PricewaterhouseCoopers Slide 8
  9. 9. Where does CIO fits in Skillsets required for a CIO in M&A situation • Strong influencing, networking and negotiation skills to influence key deal decisions • Robust understanding of business and cross functional areas like finance, marketing, sales, HR ,operations and supply chain • High-level, organizational decision-making to take key IT decisions influencing the deal • Strong finance skills to validate business case and prioritize initiatives • Strong people and cross-cultural skills to deal with cultural and people integration issues and motivate staff • Strong program management and integration skillsets to achieve speed and desired synergies • Robust understanding of technology (applications, infrastructure and process) and how IT acts an enabler for business strategy Role of CIO in M&A September 2010 PricewaterhouseCoopers Slide 9
  10. 10. Thank you Salil Agrawal Phone: +91 124 4620552 Mobile: +91 9810064535 E-mail: PwC © 2010 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.