M&A Integration: How Not to Do It


Why does the team need to travel and spend money? You know well enough that there is pressure on costs and it is imperative that everyone contribute and IT is no exception. I don't want to hear excuses on why it will not work effectively. Get on to a video-conference to understand more about what they have and what they do. Use a bit of technology to get requirements from these markets; there has already been too much travel from other functions. I just came back from a review and we have busted the travel budget.

 

With this spiel to the CIO and the IT team, the CFO proceeded to travel to four countries to give the message on cutting cost to the country heads. It was not important that he always made up his trips last minute and traveled First Class. It was also not of relevance that just his personal travel budget was higher than the total IT budget for travel. It did not matter if sub-optimal solutions were being used by some of the acquired companies and the integration effort had faltered in the absence of travel authorizations to IT.

 

The company had leapfrogged into the big league with acquisitions in quick succession; after an era of organic growth, the change in pace was exciting. There was a palpable sense of aggression and pride that prevailed internally and also made news thrusting the company to the pages of business magazines and newspapers. At the same time there was a bit of uncertainty on how to work the mechanics of integrating multiple companies simultaneously. As normal, Consultants were hired and teams created to oversee the process.

 

Business teams created groups of domain experts who traveled to the acquired companies globally to meet their counterparts, understand culture, process and systems used. Teams were mapped and processes reviewed for compliance to standards and regulatory requirements. All this was fed into a structure which captured each and every component of the new company beyond the pre-acquisition due diligence. They followed the best practices laid down by the Big Consulting Company assisting in the integration.

 

Weeks became months and progress was good though with one glaring gap; IT was nowhere to be seen in the picture. The business teams reached out to the CIO seeking a timeline and calendar that IT would follow in the integration process. The CIO advised them of the incremental data required and promised to have his team reach out to the far side. Quickly it was evident that the gap cannot not be bridged with conference calls and email exchanges. Having executed a couple of integrations, the CIO realized that he was being setup for failure.

 

The CIO reached out to the business teams with his constrains and sought help which was promptly offered since everyone was now feeling the pinch of unintegrated email systems which bounced messages, lack of information flow and integration between various systems including financial reporting. Some of the functions whose success depended on harmonized IT were happy to sponsor. Despite the urgency, need and demand, ego prevailed and the CFO was unwilling to accede leaving everyone frustrated and wondering.

 

It was evident that the deadlock would be difficult to break; in the absence of an integrated approach taking off, business leaders attempted to use local solutions. They had to deliver results with synergies and process improvements, and their dependence on IT was critical. Using personal rapport with the CIO they validated some of the local solutions that could be deployed in the short term. Scrounging for budgets they attempted to get these off the ground; talent crunch and missing strong leadership failed to get them going.

 

Integration review meetings became a war of words with the CFO finding excuses and then blaming the CIO for not effectively managing the effort. Business knew the reality to be otherwise and had reached a situation that they had no recourse but to accept the fact that the new company will remain technology challenged for some time to come. The acquired company's leadership team too accepted the power play and silently lived in their acceptable level of inefficiency hoping that someday in the future things would change.

 

What happened to the CIO and the IT Team? Well in quick succession many of them found greener pastures leaving the CFO to find other scapegoats for his ego while business struggled to stay afloat.

 

This blog is reposted with permission from Arun Gupta. To read Arun's Blog, you can visit:http://cio-inverted.blogspot.com

 

(Image courtesy: FreeDigitalPhotos.net)

Categories: Management

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Arun Gupta

Arun Gupta is Managing Partner & Director at Ingenium Advisory. Arun has been the CIO of Cipla, one of the ...

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