Seizing the Moment: Assessing the Opportunities for M&As

by Dr. Stephen J. Andriole, Fellow, Cutter Consortium

Mergers and acquisitions (M&As) -- and even divestitures -- represent opportunities to reengineer technology acquisition, deployment, and support. Like other major corporate events (such as missing earnings estimates five quarters in a row), M&As can be exploited to make decisions that somehow get endlessly tabled in the routine ebb and flow of many companies.

The argument here is that events that have the significance of a merger or acquisition should be exploited -- not just in terms of the business, but according to the technology opportunities they create.

There's a methodology to M&A event reengineering. Assessments yield recommendations within the context of industry benchmarks and best practices. But, as always, corporate cultures and the biases and idiosyncrasies of the post-M&A senior management team will limit the reengineering that can actually occur.

So what are the possibilities here? M&As are life-changing events for most companies. They are usually triggered by (sales, growth, management) problems or the chance for senior management to make a significant amount of money. M&As occur when going it alone is tough, when there's investment pressure to grow and organic growth is beyond a company's reach, when investors want a return on their investment, when the founders want to cash out, and when -- in the case of a public company -- the Wall Street analysts who cover the stock need to see some excitement to keep the buy recommendations coming.

Unfortunately, a great deal of research confirms that mergers and acquisitions are not beneficial to shareholders.^1-3 Nevertheless, the possibilities to "prune" the ranks (code for shedding employees, closing stores and plants, etc.), rebrand the company, and otherwise reinvent the company's mission are many. The key is to seize the opening presented as event planners do when they have to organize a large wedding in 60 days. There are two steps to the process. The first assesses the existing environments of the companies seeking to merge.⁴ The second identifies the opportunities for meaningful -- yet realistic -- change. (For more about these steps, see "Technology and M&As: Event Planning for Technology Reengineering," the author's article in the Cutter IT Journal, Vol. 21, No. 10.)

The assessments my colleagues and I conduct can help determine the extent of the reengineering of technology acquisition, deployment, and support that is possible. If there's an appetite for change -- driven by change-oriented corporate cultures and leadership -- then an M&A event can be used to implement industry best practices. Some of these best practices include:

• Organizational structures that optimize the business technology relationship and enhance technology's ability to support the business (e.g., structures that emphasize the role of business relationship centers [BRCs] and business relationship managers [BRMs])

• Reporting relationships that facilitate cooperative business technology strategy (e.g., BRMs reporting jointly to business units and enterprise technology)

• Increased investments in business relationship management, business analysts, and project/program/portfolio management

• Technology standardization, especially within the computing and communications infrastructure, but within the applications portfolio as well

• Auditable security, backup, and recovery policies and procedures

• Pilot-based technology adoption

• Empirical performance metrics

• Infrastructure outsourcing

• Selective applications hosting (software as a service)

These best practices, among others, represent reengineering objectives. If they can all be addressed, then the merger or acquisition is more likely to succeed than if they're ignored. Assessments of the culture and the leadership determine how close we're likely to come to reengineering driven by best practices.

Mergers and acquisitions present reengineering opportunities that are few and far between. Many companies can change only when a major event occurs. An M&A certainly qualifies as a major event -- ideally, the companies involved in these transactions can seize the moment for their competitive advantage.

-- Dr. Stephen J. Andriole, Fellow, Cutter Consortium

Notes

¹McClenahen, John S. "How Much Value Creation?" Industry Week, January 1999.

²Straub, Thomas. Reasons for Frequent Failure in Mergers and Acquisitions. Gabler, 2007.

³Zaheer, Aks, and David Souder. "The Strategic Value of Mergers and Acquisitions." Strategic Management Research Center Review, Vol. 7, No. 1, November 2004.

⁴I am not drawing a huge distinction between a merger of relative equals and acquisitions of much smaller companies by larger companies. While there are obviously significant differences there for other analyses, the focus here is on reengineering business technology in response to a major event -- a merger, an acquisition, or even a divestiture.