Post-merger integration and IT considerations

Four simple steps to a successful, smooth-running and long-lasting merger

A successful merger is about more than just sticking two firms together – and post-merger integrations can fail to meet synergy targets and timelines. When this happens, it is expensive and time consuming to align the business systems so they can start delivering the value intended by the merger.

Firms should apply the following framework, consisting of four simple steps to success:

1. Ensure business requirements and the processes of the combined enterprise are understood and communicated. This needs to be done by all business functions and not just IT. Very often, firms ignore or rush this step, as they assume the future business processes are similar to the old ones.

2. Ensure there is a practical methodology for systems evaluation. A good operational framework usually consists of the following elements during migration, which needs to be completed within one to two months after the merger:

• In the first month, the business processes of each business function must be mapped to the future system.
• Risk mitigation. The system must ensure that there are no large operational risks during transition.
• The migration’s timeline should be as tight as achievable, using as much of the existing infrastructure as possible.
• The future system must match the business strategy and, crucially, be useable for several years. It also needs to be scalable to ensure it can be rolled out to subsidiaries and even legal entities.

3. Ensure the synergies are aggressively defined and achieved using dedicated resources. Conduct a bottom-up analysis during the design phase, showing who is responsible for achieving targets. Most of the IT-based synergies come from one of four areas:

• Sadly, headcount reduction and productivity improvement top the list.
• Application and projects migrating off redundant systems.
• Infrastructure consolidation.
• Vendor and third-party renegotiation.

4. A clear plan for the first 30, 60 and 90 days needs to be developed in the first 10 days. The CIO should lead this pro­cess and the plan should cover:

• IT and business systems/application strategy and rollout.
• IT infrastructure.
• Budgets.
• The two IT departments should be organised to push through the transition, but also restructured for post-integration normality.

IT functions should not be given a back seat during mergers as they have a vital role. These steps will help maximise the effectiveness of the integration process as fast as possible.

Amit Laud is senior director of the technology team at Alvarez & Marsal