'The role of IT in the M&A process’ presented at British Computer Society Consultancy Group 13 June 2006

1. The role of IT in the M&A processThe role of IT in the M&A process
Steve Anderson Dip Mgmt MCMI FIMIS FBCS CITPSteve Anderson Dip Mgmt MCMI FIMIS FBCS CITP

2. 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

3. DefinitionsDefinitions
• A MergerA Merger
““The joining of two companies”The joining of two companies”
““Two or more companies combined to achieve greaterTwo or more companies combined to achieve greater
efficiencies of scale and productivity. This is accomplishedefficiencies of scale and productivity. This is accomplished
through the elimination of duplicated plant, equipment, andthrough the elimination of duplicated plant, equipment, and
staff, and the reallocation of capital assets to increase salesstaff, 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 aOne 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 inThe act of one company taking over controlling interest in
another company.”another company.”

4. 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

5. 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

6. Steps in the process and IT involvementSteps in the process and IT involvement
TARGETTING
ANALYSIS
DUE
DILIGENCEVALUATION
DOING
THE
DEALANNOUNCEM
ENTTRANSITION
INTEGRATION
STABILISATION
D-DAYAudit High Level Low LevelCostStrategy Assets

7. 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

8. 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 byExpanding 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 orderImplemented global standard sales order
system, email and data networkssystem, email and data networks
• Migrated all SKUs and customer data acrossMigrated all SKUs and customer data across
along with manual data entryalong with manual data entry
• Localised system for country accountingLocalised system for country accounting
rulesrules

9. 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

10. Common IssuesCommon Issues
• Lack of senior managementLack 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

11. 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 strongEstablish 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