A few years ago, I was discussing this phenomenon with the CEO of one of our clients. His company had grown almost entirely through acquisition, and for several years the company had experienced revenue growth rates exceeding 20%. However, the company had plateaued with respect to earnings, and looking at their overall performance it became clear to him (and to the Wall Street analysts that watched his company) that a great deal of money had been left on the table. Working with that CEO, I developed a model called the ACL Life Cycle. Understanding and using the ACL Life Cycle has proven enormously beneficial to clients depending on an M&A strategy for continued growth.

The ACL Life Cycle

The ACL Life Cycle describes the maturation process of companies who grow substantially through acquisitions and mergers. Using the ACL model, we can clearly identify the company’s current position. Knowing that position, and then looking forward at the company’s financial objectives through the lens of their business strategies, the specific actions that are needed become clear. Those actions can then be formed into an executable plan with associated performance measures, and managed through completion to bring the overall enterprise to heightened levels of financial performance. It is important for acquisition-oriented executives to understand the major phases and characteristics of the ACL Life Cycle.

Businesses who have survived one or more acquisitions and/or mergers are usually left with some degree of disintegration among their processes and systems. A company’s success in reaching the financial objectives of the merger or acquisition is directly correlated with the degree to which that disintegration has been replaced by a set of business processes and information systems that are common enough to generate enterprise-wide leverage. Implicit in that commonality is enterprise-level direction and guidance, manifested in company-wide business strategies and performance measures that align all of the combined business units. These businesses move, in this post-acquisition or post-merger environment, from an acquisition-based operating model to one characterized by shared services and a general commonization, to a stage where the enterprise “whole” really is able to become something greater than the sum of its business unit “parts”. It is more than the typical cost-reduction synergy anticipated in most of these transactions; it is a new platform for innovation, and an even higher level of innovation-based leverage.

Companies who experience substantive growth as a result of business acquisitions typically follow the ACL life cycle. ACL in this context stands for: Acquisition, Commonization, and Leverage. Many companies never leave the first stage of this maturity scale, and still more remain at the second stage. The most successful companies are usually those who recognize the importance of moving through all three stages, and consistently implement a structured process for doing so.
All companies experience pressures that push them toward decentralized operations, including idiosyncrasies of specific market niches served, the uniquenesses of isolated business processes, unusual needs of specific customer populations, and natural organizational entropy. At the same time, most of the companies that are successful in achieving the financial performance objectives established for the newly merged enterprise manage to overcome those challenges, electing to pursue the advantages of leverage, including:

• broad synergistic brand recognition, enabling cross-selling, bundling of products and services, and improving revenue
• interchangeability of business process resources, enabling the company to reduce its asset base
• commonality and scalability in equipment / skills / facilities, facilitating innovation and growth into additional markets
• higher utilization of business assets, reducing unit cost
• lower levels of redundancy, resulting in reduced operating costs

These companies also typically find that maintaining compliance with financial reporting standards such as Sarbanes-Oxley requirements are enhanced as a result of strengthened internal controls.
Some companies make a deliberate decision to remain “holding companies”, which simply buy and sell diverse businesses that have only marginal relationships with one another. These conglomerates prefer to manage the portfolio through buying and selling components, and allowing the leadership teams at the individual companies to manage ongoing operations from strategy through execution. A few of them have been quite successful, and this article is sometimes not as directly applicable to those at a corporate level. It works very well, however, for their major divisions. Companies that benefit most from understanding the three stages of the ACL Life Cycle are those companies who have decided to focus on a single core industry – Aerospace & Defense, Automotive, Chemicals and Polymers, Textiles, Electronics, Telecommunications, Consumer Products, Medical Equipment producers, Healthcare providers, and Financial Services providers are all good candidates.

The Acquisition Stage of the ACL Life Cycle

Companies in the Acquisition Stageof their life cycles are usually focused on revenue growth, and capturing market share. They are characterized by high levels of autonomy in management, in the reporting of site-level data to the corporate parent, and in the design of their business processes and systems. Companies who remain in this stage for long periods of time following acquisitions usually act as holding companies, with the corporation allowing individual divisions or sites to operate almost as independent companies with their own P&L, strategic plans, and market-facing branding. Often, companies in the Acquisition stage lack a common vision of the future of the overall business, and tend to operate at cross-purposes among the operating units. They sometimes even compete against one another for the same customers. They share little operating information, making it nearly impossible to coordinate and deploy “best practices”, effectively distribute work load, utilize general market intelligence, and grasp other elements that could provide corporate-wide leverage of the businesses’ assets and resources. A few industry-specific examples here should help to illustrate the situation:

Manufacturing companies in the acquisition stage are usually characterized by redundancies in raw materials, equipment, staffing, and other business resources. Because manufacturing companies are relatively material-intense, a great deal of cost can be tied up in raw materials, work-in-process, and finished goods. Since acquisition stage companies have so little visibility between business units, there is little opportunity for them to reallocate these assets in order to use them effectively. As a result, the most costly resources remain the most underutilized. In addition, acquisition-stage companies have not centralized the management of even commodity-level business processes, such as finance, human resources, and information technology. This lack of centralization leaves additional inefficiencies in place around accounting staff, employee benefits provider subscriptions, business software applications, data centers, and computing equipment.

Telecommunications companies in the acquisition stage also have unrealized opportunities for greater leverage from their business assets, but these more often take the form of redundancies in network equipment, network coverage, retail outlets, partner agreements related to the sale of their products, and interconnection agreements with other carriers. In addition, acquisition stage telecom companies often have a substantial amount of unrealized leverage in the lack of integration among the data bases and information of their various divisions that could enable shared service operations for commodity-type processes such as billing and cross-selling of products and services. Like manufacturing companies, telecom companies in the acquisition stage also typically have unexploited opportunities around the consolidation of data centers and related equipment and staffing.

Healthcare providers in the acquisition stage usually find opportunities in different areas of their businesses, because of the differing cost structure of their operations. The bulk of their costs and their opportunities while in the acquisition stage of maturity in the ACL Life Cycle are related to employee salaries & benefits, and to medical supplies and drugs. It is less common for these businesses to be able to effectively share inventories and equipment, since the nature of their business is rooted in community health care that requires local service provision. The opportunities that do exist, which are typically not exploited well in acquisition stage health care companies, are related to centralizing commodity type business processes such as finance, human resources, and information systems, and leveraging required service and supply procurement across the enterprise.

Financial Services providers, such as banks, brokerages, credit unions, financial planning companies and tax & audit services exhibit yet another cost profile, with the largest elements typically including personnel and occupancy costs. In these businesses, like health care provision, being where the customers are is critical. The companies’ ability to understand the changing demographics and match up their branches as well as their skills to the targeted customer base is often a differentiator between the companies that succeed and those that fail. Financial services providers who are still in the acquisition stage of maturity in the ACL Life Cycle often do not have the commonality in fundamental business processes and systems to readily reconfigure their operations to meet the changing needs of their marketplace. Their acquisitions or mergers have enabled them to grow horizontally, typically into adjacent markets. However, lacking an adequate foundation of commonality in processes and systems, there is substantial money left on the proverbial table as a result of ineffective resource deployment, and delays in the reporting of operational performance data that would enable the company to be more responsive. These companies also fail, in their acquisition stage, to take advantage of their larger purchasing power to gain leverage around purchased services spanning items as diverse as employee health care and branch-level office supplies.

The Commonization Stage of the ACL Life Cycle

Companies in the Commonization Stage of their life cycles have usually awakened to the value of focusing on Return on Net Assets (RONA) and Return on Invested Capital (ROIC). In order to begin to capture improvements in these areas, companies in the Commonization Stage often turn to shared service models of operations for selected business processes and systems. Strategies and performance measures begin to crystallize around common themes that span multiple operating units or divisions. Among the areas of focus for a shared service model in this stage are Finance (A/R, A/P, General Ledger, and Financial Reporting), Human Resources (Payroll, Benefits, and Employment Records), and Information Technology (Computer Hardware, Network Administration, and selected Software Applications Management). Some companies in the Commonization Stage also move Procurement and other aspects of Materials Management to a shared service model, enabling the corporation to more effectively leverage its broadest possible purchasing power.

Manufacturing companies in the commonization stage of maturity typically have shared services in place for commodity types of business processes such as finance, human resources, and information systems management. As they advance through the commonization phase, some of them also begin to pull together a common platform for procurement, encompassing at least their most costly and common raw materials. A few in this stage reach a point where their data center operations are completely centralized, and may even be outsourced to a third party like CSC. Toward the end of the commonization phase, centralization of work deployment and capacity utilization as well as process quality emerge as companies begin to deploy common processes and systems in customer requirements management, enterprise requirements planning, manufacturing execution systems, and distribution management systems.

Telecommunications companies in the commonization stage of maturity also typically have shared services in place for commodity types of business processes such as finance, human resources, and information systems management. As they advance in maturity through this stage, telecoms also become aware of the available leverage in centralizing the management of some of their most valuable assets. However, unlike the manufacturer’s raw material focus, for telecommunications operations those elements are things like spectrum licenses, network equipment, connection agreements, partner agreements, distribution centers, and retail outlets. Centralizing the management of those assets to identify overlaps and redundancies enables telecoms to emerge from the commonization stage with much more effectively leveraged business assets, providing broader market coverage with a lower total asset base and generating much higher earnings on that consolidated foundation.

Healthcare companies in the commonization phase of maturity find substantial benefit in the commonization and centralization of their commodity type processes and systems.  This is primarily because of the impact on cash flow and earnings when the employee base is reduced through shared services, and employee benefits and supplies are both leveraged in terms of the broader purchasing power of the company following a business acquisition of significant size. However, there is also an especially rich opportunity available to healthcare companies in the commonization stage that stems form the leverage available related to insurance coverage – not for the employees directly, but covering the potential liability of the company itself. This category of cost is typically about the third largest slice of the pie, and significant reductions there can translate quickly to a meaningful earnings impact.

Financial services providers in the commonization stage of the ACL Life Cycle, like healthcare providers, often find substantial benefit in the commonization and centralization of their commodity type processes and systems. With roughly half of their cost of operations wrapped up in employee salaries and benefits, there is an opportunity for meaningful impact on cash flow and earnings when the employee base is reduced through shared services, and employee benefits and supplies are both leveraged in terms of the broader purchasing power of the company following a business acquisition or merger. The next significant area for financial service providers in the commonization stage is the capability for rapid reconfiguration of the business based on enterprise-wide visibility of operational data and market intelligence.

The Leverage Stage of the ACL Life Cycle

Companies in the Leverage Stage of their life cycles are usually embarked on a fierce drive toward adding real value. They are relentless in their efforts to fully utilize the assets of the entire corporation, driving out redundancy and its associated costs. They are then able to pivot on the fulcrum of those more agile processes and systems to implement innovations that foster organic growth resulting in greater market share, greater revenue, and improved earnings for their shareholders. Leverage Stage companies also establish a structured and repetitive process of assimilating new businesses, gathering and incorporating market intelligence into company-wide strategies, and innovating on the basis of these new combinations to capture additional market segments. These companies are characterized by coordination and centralization of major business functions such as the planning and allocation of R&D, production work, inventories, raw material purchases, personnel, and factories & equipment. They centrally manage a broad spectrum of common business processes and systems, including customer requirements management, product data management, enterprise requirements planning, manufacturing execution systems, and logistics management. They are constantly changing, evaluating and configuring business assets to meet future market needs, acquiring and developing new businesses, and shedding assets that no longer fit their evolving model.

Manufacturing companies in the leverage stage of maturity typically have shared services in place for most of the critical business processes of their company, having reached beyond the commodity level processes and into those which deliver the most value to their customers. Examples include sales & marketing, order entry & customer service, capacity planning and management, production scheduling and shop floor control, and distribution requirements planning. As they move through the leverage stage of the ACL Life Cycle, some of these companies leverage the commonality of their processes and systems to produce innovative new products and services, identify additional market opportunities, and develop industry-changing relationships that reach through their supply chains.

Telecommunications companies in the leverage stage of maturity also have shared services in place for most of the critical business processes of their company, including the seamless provisioning (often called “flow-through provisioning” by industry insiders) of all telephonic services to customers stemming from a single telephone conversation responding to an individual inquiry about a service. This type of capability is only enabled when all of the information from what have historically been disparate data bases is available in an intelligent form through excellent systems integration, based on exceptional levels of commonality and strength in enterprise-wide business processes.

Healthcare companies in the leverage stage of maturity have typically discovered and implemented leverage-based improvements in their major cost structure elements as a result of enterprise-wide information visibility flowing from systems integration and centralized management of critical business processes. Health care companies generally also have uniquely challenging business conditions related to three other areas where leverage level operations can be a powerful tool.

The first of these areas is employee safety. Most health care organizations are spending a substantial amount of money in this regard, with training and documentation of company polices and safety-related practices requiring an increasing amount of company attention. The integration of systems and commonization of processes in a leverage stage health care company offers opportunities to more quickly incorporate internal best practices, externally imposed business requirements, and feedback about lessons learned across the entire health care organization regardless of geographic dispersion. Commonization and centralized management here can result in substantially lower cost, and more importantly, substantially higher and more uniform levels of employee safety.

The second area is bad debt. The integration of customer data, and effectively interfacing a common set of enterprise-wide processes and systems with outside service providers such health maintenance organizations and insurance carriers, substantially reduces the amount of bad debt in leverage level health care companies.

The third area, and perhaps the area of richest opportunity, is the area of patient medical information. This area is tricky because of legislation related to patient privacy and guidelines recently established for the maintenance and communication of patient medical information. However, one of the fundamental challenges faced by health care providers is the absence of available medical history, particularly when a patient is admitted to an emergency room or urgent care facility. Particularly when a patient is unable to respond to questions directly due to an incapacitation illness or injury, time can literally mean life or death. Making all necessary information available to the physicians and other health care professionals involved as quickly as possible is extremely important. When critical business processes and information systems for the management of this information are brought to an effective level of commonality, the rapid dissemination of the needed information can be greatly improved, while patients’ expectations around the privacy of their information are still met.

Financial services companies in the leverage stage of maturity, like health care companies in some ways, must balance the needs of differing local customer geographies against the advantages of centralized management in critical business processes and systems. There is real value in allowing some latitude to local branch officers and customer-facing staff such as loan officers to accommodate the unique circumstances involved in specific cases. However, these companies often find that a significant advantage of the leverage provided by enterprise-wide commonization of processes and systems is the ability to see the nuances of differing markets at a corporate level, and recognize broader trends among those different markets more quickly and clearly than they could before. This improved visibility, in turn, enables management to reconfigure their service offerings, redeploy resources such as sales dollars, and organize sales campaigns for those specific markets more quickly than they could previously.

The best of these companies, regardless of what industry they occupy, utilize their common platform of processes, systems, and information to understand the needs of their customers in unique ways, and fluidly translate those needs into the features of their products and services. A few, at the very top of the game, come to understand the customers’ needs even before the customer recognizes them, and when necessary they reconfigure their entire business to meet those needs, gaining unassailable competitive advantage. The enterprise-wide leverage they achieved as a result of carefully and skillfully handling the post-merger or post-acquisition integration of processes, systems, and data provided the platform from which innovation launched them to new levels of performance. Examples could as easily be provided for companies in pharmaceuticals, retail operations, or the food & beverage industry. The lessons learned and the techniques vary a little, but the principles are the same.

Did you know that the vast majority of mergers and acquisitions not only fail to hit their performance targets, but actually DESTROY shareholder value? Here’s how to identify and avoid the five most dangerous situations in mergers and acquisitions so your company can get the synergy it needs from these transactions:

Condition #1.
Can you make the tough calls? Recent interviews with merger and acquisition (M&A) industry executives reveal that the number one problem is: “Failure to make the tough calls.  You can’t appease everyone.  Businesses that end up with co-directors, co-CEOs, or co-leaders of any kind are businesses heading for trouble.”

It is best to make tough decisions up front, as the actual business combination is being formulated. Then implement them not long after the deal is closed. This is true not only of decisions pertaining to people, but also facilities, equipment, and critical information systems. An air of confidence -not arrogance or insensitivity, but resolute confidence and steadiness of direction – is an important element of M&A leadership. Making tough calls with confidence is one essential element.

Condition #2.
What type of culture does your company exhibit; Entrepreneurial or Administrative? M&A managers recently cited culture clashes as “Significant – to – Severe” more often than any other dangerous condition. I see cultural mismatch challenges arise again and again. In many cases, they are born out of geography. In other cases, they stem from the industry involved.
To understand and deal with cultural issues: 1) Identify the cultural characteristics of both businesses, 2) identify the disparities that exist between the two,  3) prioritize those that represent the greatest threat to progress in assimilation, and 4) take discrete steps to mitigate those risks. Ignoring this problem is deadly. Build discrete integration plans around melding company cultures to stay out of hot water.

Condition #3.
Does your company’s management team have experience with mergers and acquisitions? Another devastating problem resulting in M&A failure is inexperience among the acquiring management team in performing acquisition tasks. These activities include target selection, due diligence, and post-transaction integration. Industry specific and even process or system specific knowledge is a substantial asset. But in the M&A world, the experience of the acquiring team with previous acquisitions and mergers is also critical.

It is often possible to supplement an inexperienced management team with outside professionals. However, finding someone that understands both the acquisition process and the fundamental business processes that are integral to the operations of the target company is often challenging. Don’t be afraid to get professional help when inexperience is a factor. There is too much at risk in M&A situations to use on-the-job training.

Condition #4.
I wish I had a dollar for every occurrence of this one I have witnessed over the last 30 years! Like many other areas of managers’ performance, hubris tends to blind the participants to the objective results of their actions. In a KPMG survey conducted of executives in 118 companies doing 700 cross border deals between 1997 and 1999, 82% of them reported that they considered the deals to be a success. However, 30% of them actually resulted in added value, and 31% lowered value with the balance remaining basically unchanged.

Long-time observers of this phenomenon often assert that managers seek to acquire other companies for their own personal motives and as a result they pay financial premiums for those companies that are not otherwise justifiable. Ego is the villain here. When this occurs, only intervention on the part of the board of directors has a strong chance of averting the problem. Your company’s board needs to be on constant alert for this situation, and step in immediately when they see it developing.

Condition #5.
Does your company’s acquisition strategy align business processes and systems to leverage all business assets? One of the most important elements of integration, and the one that is usually the weakest, is the commonization of business processes and systems across the newly formed enterprise. Integration most often fails because of lack of focus on the commonization of business processes and systems.

Successful M&A leaders understand the three reasons for this malady:
1) Many executives do not understand the importance of achieving commonality in the processes and systems of the combined enterprise.
2) Other company leaders do not know how to go about achieving commonality in their processes and systems.
3) Still other executives are simply unable to follow through on the difficult decisions related to post-acquisition and post-merger consolidation. To avert this problem, choose your M&A leaders carefully. Make sure the entire team (including the leaders of the acquired business unit) understands: You will be moving toward common processes and systems. Identify and deal with rebellion early in order to avoid a long and painful insurgency.

Your M&A activity can be a real earnings generator rather than a dilution nightmare, but only if leaders are honest with themselves and each other. They must work hard and work as a team to avoid the five most dangerous conditions of M&A.

Disappointed with your company’s earnings performance since your last acquisition? Worried that the next acquisition or merger will have a similar affect? You’re not alone! Study after study has demonstrated that mergers and acquisitions are a risky business. In spite of the fact that a lot of M&A advisors rake in substantial fees each year, almost every major review of companies completing Merger and Acquisition transactions shows that most of these transactions fail to deliver on promised financial performance. Like every other investment, the biggest risks yield the biggest results – whether they’re good or bad. One way to improve your odds is to study the methods of the most successful Merger and Acquisition companies.

As an industry executive, Ive encountered Merger and Acquisition challenges many times over the course of my career. I have also recently interviewed numerous C level executives from some of the worlds largest and most successful companies across several industries about this topic. I also conducted an internet-based survey of senior managers with extensive Merger and Acquisition experience. Seven winning characteristics emerged among the few truly successful Merger and Acquisition companies:

Characteristic #1:  Successful companies follow a proven path of general acquisition and mergers. First, they do meaningful strategic planning. This practice enables acquisition targets to be identified which are excellent strategic fits for the corporation, rather than mere opportunities for getting bigger. Second, they perform thorough due diligence work. Their due diligence differs from poor performers because they plumb the depths of business processes and information systems capabilities and capacities in the acquisition target to ensure appropriate valuation and strategic fit. Third, they negotiate terms and conditions for the transaction that avoid overpayment. They accomplish this by making certain that management does not become enamored with the target company. Fourth, they plan for post-merger or post-acquisition integration. That plan includes a comprehensive communications plan, alignment of objectives and performance measures, and integration of processes and systems. Fifth and finally, after the deal is closed, the most successful companies relentlessly execute the planned business assimilation and integration activity. M&A requires detailed planning, rigorous management, and aggressive execution to succeed.

Characteristic #2: Successful companies use initiatives or projects to perform integration, and fundamental project management techniques to manage each of the initiatives. Every company, including yours, has a unique combination of strengths and weaknesses, and market-facing strategies. The combination of these factors dictates what specific initiatives your company must use to assimilate the new business unit. In some cases, the most urgent needs will revolve around rationalization of staffing, facilities, and capital equipment. In other cases, achieving commonality in information systems to enable cross-selling and rebranding will be most important. Whatever the combination turns out to be, your company must lead these initiatives effectively through a formal program management structure. Formally structured and carefully managed initiatives are a strong characteristic of the most successful Merger and Acquisition companies. Formal program management requires such elements as a detailed project plan, discrete milestones, defined performance measures, designated responsibilities, risk management and change management processes, and so on. Initiative based integration rooted in sound market-facing strategy will improve the odds of successful Merger and Acquisition performance.

Characteristic #3: Successful companies pay meaningful attention to the match of cultures, organizations, and HR matters such as management retention. If your company has been through an acquisition or merger, you already know that the different cultures of the companies involved always make the situation challenging. In hostile takeovers, it can prove devastating. Employees often find that the behaviors previously rewarded by their company can sometimes result in demotion or dismissal. Performance criteria change, as do the people measuring the performance. When this happens, management in the acquired company, as well as many of the employees,  becomes threatened, defensive, and resentful. The loss of key leadership in critical transitional periods can ruin the deal, and even when the entire deal remains intact, the resulting organizational instability often drains so much energy and time from remaining managers that it costs the new enterprise more time to achieve expected financial performance goals.  Some Merger and Acquisition advisors report that as many as 72 percent of key managers head for the door within three years of an acquisition or merger. Almost all successful Merger and Acquisition companies incorporate a formal culture management structure into their integration planning. Some even put specific performance measures in place to monitor the success of melding the cultures following their formal public merger or acquisition announcement. The HR details, from communication to compensation, are make-or-break elements of Merger and Acquisition success.

Characteristic #4: Successful companies ensure that the acquisition is an integral part of overall business strategy. Have some of your company’s acquisitions turned out to be a poor fit with the rest of the business? Responses to my recent survey of senior managers with extensive M&A involvement indicated that the targeting of acquisitions which are a good strategic fit was the third most critical issue to M&A success. Strategic fit implies a close alignment of markets served, technologies owned, Research and Development direction, financial position (revenues, market share) between the companies involved. It also means that there is a real and quantifiable set of synergy related opportunities between the two companies. The best Merger and  acquisition performers maintain a strong strategic plan with market-facing strategies, internal operating strategies, specific performance targets, and performance metrics linked from top to bottom throughout the enterprise. They incorporate the alignment of those elements of the acquisition target into integration planning for their transactions, and pull the trigger on them soon after the deal is consummated. Effective planning is a fundamental element of successful business. In Merger and  acquisition situations, it must also be the basis for every major decision.

Characteristic #5: Successful companies have full-time time resources assigned, and strong lines of executive accountability for the success of the acquisition. Does your company assign full-time teams to acquisition pursuits, or rely on part-time efforts from people who also have a day job? The pressures of day-to-day job responsibilities for key staff members make it incredibly difficult for them to focus on a part-time assignment related to Merger and  Acquisition activity. The early assignment of skilled full-time resources to these tasks as early as possible in the due diligence phase of the acquisition or merger process is often critical to success. General Electric, arguably one of the best acquirers in the business (certainly one of the most prolific) recognized that management experience made a huge difference in the success of their endeavors, and as a result, decided some years ago to designate integration management as a full-time role in their company. Studies of GE and others show that companies who assign full-time teams have better Merger and Acquisition track records.

Characteristic #6: Successful companies have discrete targets for integration activities, and relatively short-term financial objectives that are quantitative. In your company’s last acquisition, were specific performance targets published and widely known? While goals such as “become accreted within a year” are quantitative enough, they must be broken down into a set of initiatives and accompanying performance measures in order to be useful. The best companies understand not only what the top-level goals are in quantitative terms, but also what specific actions will be taken, by whom, and by when, to achieve that desired result.   Hence the detailed project plans around a defined set of initiatives described in Characteristic # 2, above. Initiatives can relate to revenue growth, market share growth, or operating cost reduction. They can involve a wide variety of actions such as establishing strategic partnerships for marketing or distribution, efforts around cross-selling or re branding, facilities rationalization, new Research and Development initiatives, organizational restructuring, and information systems upgrades. Those companies who are most successful march through discrete initiatives toward quantitative goals. Achieving those discrete goals enables the newly merged company to hit specific financial objectives at designated times. The most successful Merger and Acquisition companies are those who most discretely define what success means.

Characteristic #7: Successful companies move assertively to get the newly acquired business entity onto common business processes and information systems early on. One of the C-level executives I interviewed (this one was a Financial Services executive) in preparation for my book said: “We have three top priorities in these transactions: gain market share, grow assets, and reduce operating costs in proportion to the assets we manage. Getting the acquired entities onto common processes and systems is strategically critical for us in achieving that third goal. But beyond just our financial performance, it impacts the morale of our employees, our ability to present a consistent face to our customers, and our efficiency in employee training. When a company like ours is systematic in their approach, they can bring new acquisitions onto common processes and systems in six to nine months.” Most of the leading companies in this area, including companies like GE and Cisco, exhibit this characteristic. Unity and consistency produce and exhibit strength to customers and shareholders. The strength of unity and consistency is never more important than the period immediately following a merger or acquisition.

In my experience, companies that have grown largely through acquisition have fallen far short of their expectations. The truth is that more than half of all of the companies moving through this process actually destroy shareholder value. Over the last 30 years, I have encountered three primary reasons for this failure.

The First Reason for Failure
The first reason for failure in these cases is that many executives do not understand the importance of achieving appropriate levels of commonality in their processes and systems.  I recently interviewed a CEO on this topic who said that while the executives involved in his company were aware that there were potential gains available from the integration of processes and systems; they were considered minor in light of bigger objectives such as gaining market share. He perceived almost no relationship between an enterprise’s ability to leverage the broader capabilities of a combined enterprise and the capture of additional market share. The Fortune 100 company involved had grown through a multi-decade process of acquisitions and mergers, and had still remained fairly immature in terms of integration. They had common finance and human resource systems, and most of the business processes supported by those systems had been brought into a reasonably aligned position. As a result, the closing of financial books was much faster than the pre-alignment days, and fundamental processes such as the generation of payroll checks and annual activities surrounding performance appraisals and compensation adjustments were fairly uniform. However, the most fundamental processes and systems that comprised the company’s ability to add value were left largely untouched.

The company’s performance as reflected by metrics such as EPS, RONA, and the price of common stock remained lackluster. The company lost ground to both domestic and foreign competitors, and eventually divested itself of most of its vertically integrated operations in order to hold on to profitability. This corporate retreat, moving the burden of effectively managing operations to a supplier base, left the company at significant risk of material shortages, cost escalation, and quality problems. It also made the introduction of new technologies more challenging, and retarded some the company’s most promising opportunities for internal innovation.

Many companies, especially in the industrial manufacturing segments of American business, seem to have concluded that managing the most value-additive processes of their businesses is simply too difficult, and that keeping up with offshore competitors is not possible; hence the current trend toward disintegration. However, the evidence is not yet suggesting a broad improvement as a result of this trend; rather, many of the companies involved appear thus far to merely be holding their own.

The story of vertical integration is certainly an old one, and probably the most famous example was Henry Ford’s original manufacturing operation that literally changed the world. These days, vertical integration in the automotive industry is more often related to reaching forward toward the customer, such as General Motors’ formation of the General Motors Acceptance Corporation (GMAC). Achieving vertical integration through acquisition and merger became a larger feature on the business landscape in America more recently. Examples of late are the merger of Time and Warner in 1989, the purchase of Medco Containment Services by Merck & Company in 1993, and the series of moves made by aluminum manufacturers such as Reynolds to acquire can manufacturers such as BevPak.

The motivations for performing acquisitions and mergers to achieve vertical integration most often center around: assurance of a dependable source of supply, reducing throughput times in the supply chain, achieving lower costs through a shift away from outside procurement toward internal transfer pricing, and satisfying the need for specialized inputs such as proprietary material formulations, custom equipment or internal components, and so on. In addition, many companies who integrate vertically backward through the supply chain find that they can more consistently produce high levels of quality via the commonization of processes and systems throughout the enterprise.

Another CEO I interviewed only a few days later understood the need for commonality and integration very well. This CEO had presided over many acquisitions in the course of his 25+ years at the company, and was able to point to almost flawless expansion without any dilution in company value, hitting accretive value increase targets in most cases within the designated eighteen to twenty-four month window (He also reflected on one acquisition attempt many years ago that failed, and the work that was required to pull that one apart again in order to avert disaster). During the course of my interview, he explained in detail how all new acquisitions in that company were moved very rapidly to the enterprise’s suite of business processes and systems, including finance, human resources, supply chain management, and other critical processes. In finance alone, he pointed out, nineteen separate processes and two supporting information systems were involved. Growing from a single business unit, over the course of three decades this company became the largest one of its kind, and currently operates in more than 20 states. The company used acquisitions and mergers to expand horizontally into adjacent markets, and learned a great deal during those early years about how to filter potential acquisitions and mergers so that effort was expended only in cases where the combination of businesses would support the overall strategy of the business.

These types of acquisitions and mergers, directed toward horizontal integration, are a reasonably common way for companies to move into adjacent markets. Certainly LDDS, which grew to become the second largest long distance telephone carrier in the United States before it was acquired by WorldCom, is a case in point. In these cases, the companies involved usually expect to lower their per-transaction costs by leveraging existing experience and systems assets across a broader market, and further improve financial performance by redundancy reductions and a lower overall asset base. In this way, the expertise, business processes, systems, and other assets of the business are scaled only to the extent necessary to meet the needs of the combined enterprise, and redundant assets are targeted for reduction. The asset base per unit of sales is reduced; hence an improvement in Return on Net Assets (RONA).

The Second Reason for Failure
The second reason for failure is that many company leaders do not know how to go about achieving commonality in their processes and systems. Most of these executives have no idea that the superficial overview of processes and systems so often comprised in the due diligence phase of an acquisition leaves them with only the dimmest view of the opportunities available for improved earnings and growth. However, even when this is not the case there is usually such a dearth of understanding around the discipline of business process re-engineering, lean enterprise concepts, and six sigma quality principles that they have no idea how to remedy the situation.

A couple of years ago, I was asked to accompany the corporate IT executives from one our clients to a business unit in the northeastern part of the United States. Out mission was to see whether we could determine why that division was struggling to perform even the most rudimentary activities, and yielding such poor financial results. When I arrived with my companions, I discovered that there was no adequate documentation of any business process in the division. In fact, as we went through interview after interview, I discovered that I was the only person there who knew how to document a business process in flow chart form, calling out inputs, outputs, responsibilities, and resources consumed. I was even more alarmed when I interviewed manager after manager and found that none of them (with the exception of the division general manager) could articulate any quantitative objectives for their own performance, or the performance of their division.

Moving them toward process commonality in order to gain enough leverage to generate profitability required first of all that the existing business processes be understood, so that we could identify existing performance levels and changes required. At the same time, corporate level objectives needed to be communicated and translated into divisional goals and objectives, flowed down through the business unit in a manner that linked them appropriately from top to bottom. This practice was foreign to the leaders of that unfortunate division, and it was a protracted struggle to move them into alignment. Because this company had moved so rapidly through the acquisition process, paying only cursory attention to systems and almost no attention to process commonization, earnings performance was dismal. Unfortunately, as I discovered over the ensuing year, this had been a pretty common approach over the acquisition-based history of the corporation. It was an ingrained part of the culture of management, and sorting it out was a real adventure. It remains to be seen whether the company will ever gain a real grip on the criticality of getting their fundamental business processes aligned, or whether – like so many others – they will merely attempt to overlay a common information system and hope for the best. It is important to begin with the processes and enable those processes with effective information systems. Approaching the business the other way, with systems leading process execution, is often a dangerous path.

The Third Reason for Failure
The third reason many of these activities fail to achieve expected performance levels is that executives are frequently unable to follow through on the difficult decisions related to post-acquisition and post-merger consolidation. During the course of the interviews I conducted as I prepared to write this book, one of the questions I always asked was: “What, in your experience, have been the top three things to avoid when undertaking a merger or acquisition?” One of the most frequent answers among those CEOs who were most successful was: “Failure to make the tough calls. You can’t appease everyone, and businesses that end up with co-directors, co-CEOs, or co-leaders of any kind are businesses heading for trouble.” The point is that it is best to make tough decisions up front, as the actual business combination is being formulated, and implement them not long after the deal is closed. This is true not only of decisions pertaining to people, but also facilities, equipment, and critical information systems. An air of confidence -not arrogance, or insensitivity, but resolute confidence – and steadiness of direction is an important element of the leadership required to pilot any company through the tumultuous waters of a merger or acquisition.

Few acquisitions have gone as visibly and dramatically wrong as the 1984 acquisition of EDS by General Motors. By virtually all accounts, the attempt to introduce a plain-speaking, no-holds-barred management shakeup at GM failed miserably. Most historians seem to agree that this acquisition, which cost the corporate giant hundreds of millions of dollars, was largely the product of conflicts generated when tough decisions were consistently avoided. Throughout his tenure as a General Motors employee, Ross Perot identified and exposed massive investments in various automation and acquisition projects that were dramatic failures, and repeatedly asked the board of directors at GM to intervene. They consistently refused. Even as he was being bought out and forced to leave, Perot was dumbstruck at the willingness of the board to spend the money they had authorized simply to have him, and his dissention, gone. One excellent account of this phenomenon published as a corporate governance case study, says: “In a press conference held immediately after he signed the buyout agreement, Perot told reporters, “Is spending all this money the highest and best use of GM’s capital? . . . I want to give the directors a chance to do the right thing. It is incomprehensible to me that they would want to spend $750 million on this. I am hopeful that people will suddenly get a laser-like focus on what needs to be done and do it.” Following the announcement of the buyout, and Perot’s press conference, GM stock declined $3, and EDS stock lost $4.50.”

Getting the management of a company to recognize the tough decisions that need to be made, and act on those matters in an effective and timely manner is often difficult. In the turbulent aftermath of a corporate merger or a significant business acquisition, it is especially challenging – and uniquely critical to the company’s success.

Another reason that surfaces, though not as often, is generally poor execution of the due diligence activity (touched on briefly in previous paragraphs). The most common underlying cause for that, in my experience, is an inadequate exploration of processes and systems during the due diligence phase.

To be fair to the executives involved, it is important to understand that mergers and acquisitions are revolutionary rather than evolutionary changes. The level of disruption to both organizations is severe, and there is a psychological toll taken on management and employees alike that can be devastating. The deadlines are aggressive, the sheer tension around the event is high, and there is often a jockeying for position in the new organization. It is very tough to keep one’s eye on the ball in these situations. I am hopeful that the information provided in this article will enable company executives and executives-in-development to foresee those problems, and improve our overall batting average.

This exercise is similar to what a recruiter would do when matching candidates to open positions. It starts by evaluating prerequisite experience and credentials to hold the job. A CIO, CTO, or director should have so much experience in terms of time, relative industry certifications, and underlying academic credentials. If the CTO was selling mortgages 3-months ago and happens to be the CFO’s brother in-law, you have a problem – And, yes, it happens!!

Technical staff must also have the ‘appropriate’ technical aptitude.  Depth of expertise and division of functions should be proportional to organizational size and complexity.  The larger the organization, the more focused and greater depth technical expertise should be.  Conversely, for smaller organizations, technical staff’s abilities should lean more towards general experience and skills.

By evaluating both the management team and lead technical resources, conclusions about the IT origination can be drawn. If management and technical skills are appropriate for the size of the organization, it’s a pretty good indicator of a healthy organization.  Outliers are of course fine and to be expected, they turn up in every due diligence, but they shouldn’t be the norm.  If there is a large deviation from expectations, it may indicate organizational or staffing defects that require further investigation.

During a fast passed due diligence assessment, this technique can be done quickly, usually with the information readily available.  Further, by producing a matrix outlining expected and found leadership characteristics for the due diligence report, this assessment approach is also quantifiable and fact based.

Check back for future postings, as we continue to explore the IT Due Diligence Focus Areas

Have you discovered that achieving cost related synergies in mergers and acquisitions (M&A) is like looking for the Lost Dutchman’s gold mine? Most companies looking for them never realize their sought-after treasure:

• 39% of companies entering into merger and acquisition activity indicate at the outset that they are attempting to reduce the combined direct operating costs through the merger of the two companies. Of that 39%, only 35% of them achieve their goal.
• 9% of companies entering into merger and acquisition activities indicate at the outset that they are attempting to reduce indirect and overhead costs for the combined enterprise. Of that 9%, only 39% achieve their goal.

However, the fact that most fail doesn’t mean the task is impossible; it means the task is difficult, and most are not adequately prepared.

Today’s companies have the greatest opportunity in history to achieve cost-related synergies. The advents of computers, telecommunications, and the Internet have made businesses incredibly transparent. Three of the most discretely quantifiable and controllable cost synergy elements in today’s companies are:

• Moving to a shared service model and reducing staffing redundancies. This is especially true in areas such as Human Resources, Finance, Customer Service, and Information Technology
• Achieving procurement leverage through greater volume in purchases and consolidation of suppliers to produce discounts, lowering material costs
• Rationalization of facilities and capital equipment following the closing of the deal. This boosts the utilization of fewer resources, and eliminating those which are less capable and/or less well suited to the long term strategy of the company

These, and many more areas of opportunity, should be clearly identified and evaluated during the Due Diligence phase of the M&A process. If there are so many clear opportunities for today’s companies to achieve cost-related synergies when they merge or do an acquisition, why do so few of them materialize? Successful C-level executives from some of the biggest companies in the world, with extensive backgrounds in M&A activity, cite these reasons:

• 1. Lack of clarity around the reasons for the merger or acquisition
  2. Lack of effective metrics for the success of M&A transactions
  3. Poor governance; a general lack of accountability among executives over three to five years following the transaction
  4. Insufficient time and attention to detail in due diligence and integration
  5. The dynamics of the business environment; some business strategies simply don’t hold up over time.

In order to capture the expected cost-related synergies in merging companies (whether the merging results from company mergers or company acquisition), management must do these things:

1. Address all thee areas of the business – leadership, processes and systems. Failing to address leadership aspects such as organization structure, performance measures, and alignment of goals can be deadly. Equally debilitating to profitability is failing to understand the fundamental business processes of the companies involved. Without that insight, consolidation efforts don’t yield expected results. In addition, companies who do not focus on getting commonality in their data and information systems find that things like consolidating purchases are far more challenging than expected.
2. Move as quickly as possible toward commonality between the companies involved. Those who are most successful in M&A are those who bring acquired businesses quickly and effectively onto a common platform of fundamental business processes and information systems. Use that action to retain and more fully utilize the most capable processes. At the same time, use the broader information and skills of the combined enterprise to seize additional opportunities without growing infrastructure. When you fail to do so, it allows acquired business units to remain more autonomous for longer, stretching out the time to break-even from their M&A transactions. It will take your company longer to do everything from closing the financial books to redistributing work among business units.
3. Be willing to make the tough calls - especially related to leadership, staffing, and facilities consolidations. The inability of management to make tough calls on consolidation was reported to be “significant-to-severe” by more than 75% of senior M&A managers. Another “top five” response was management hubris / unwillingness to recognize problems. C-level M&A executive interviews also show that “double-boxing” (the practice of putting two people in a single “box” on the organization chart) following M&A transactions is disastrous. It is important to understand which executives will be in leadership positions following the transaction. Do not take the path of least resistance in these situations in order to avoid offending someone.
4. Communicate! One C-level executive I interviewed recently said: “You can’t over-communicate.” Effective communication stems the flow of rumors. It gets a consistent message out to the troops. It keeps everyone focused on the appropriate sources of information. It reinforces the newly merged management structure, and eases the concerns of all stakeholders – from the management team to customers and shareholders. It also helps to reduce the attrition rates among key management and staff members. Another executive said: “We always had a motto that went: ‘8 times, 8 ways.’ We felt that a message wasn’t communicated effectively unless the employees heard it eight different times through eight different channels.” Those channels included e-Mail, direct one-on-one communications, newsletters, press releases, and so on. Topics surrounding cost reduction, such as the consolidation of facilities, staff reductions, and reorganizations always bring about an extraordinary of unrest and uncertainty. The work force and the customer base are both affected. Quelling rumors and getting everyone on the same page requires continuous, accurate communications
5. Plan the integration activity in detail ahead of the announcement. Then execute the plan. The level of detail in planning around integration activity is rarely adequate in M&A transactions. Companies fail to delve deeply enough into the business processes and supporting information systems of targeted acquisitions. They never really understand how to align them. If your company follows that path, the integration team will encounter nasty surprises. Those surprises will occur when the time comes to share information and move into shared service operations to reduce overhead costs. When the announcement is made, companies should already understand four things: 1) Their business strategies, 2) the initiatives that will be implemented to achieve combined financial operating targets, 3) the specific actions that will be taken at what times, and 4) which executives are accountable for the completion of each of these actions.

Capturing cost related synergies in M&A transactions isn’t rocket science, but it is hard work. It involves paying close attention to detail in processes and systems. It entails making tough consolidation related calls. It requires resolute leadership to adherence to company-wide process and system standards. M&A management, like any other form of leadership, is not for the faint of heart. However, the benefits of getting it right are enormous.

The Technology Due Diligence – Series Introduction is the first posting of an ongoing series on performing Information Technology (IT)  due diligence.  In this first section, we provide a brief commentary of the purposes and principles of conducting an IT due diligence, and layout the foundation and structure of the series.

Technology Due Diligence:

Information Technology due diligence efforts commonly fall into several traps.  The findings aren’t relative to the transaction strategy, or aren’t objective or thorough enough to be effective.  Worst of all, IT due diligence sometimes is not done at all, leaving dealmakers and corporate governance alike liable for unforeseen financial exposure, and stockholder retribution from any resulting negative impact to post-merger valuation.

Avoiding these traps requires following a basic due diligence success criteria. Fundamentally, any merger, acquisition, or divestiture due diligence is intended to reduce buyer exposure (or seller in the event of a divestiture), and contribute to the opportunity by providing a basis for business executives to make informed decisions.  For technology practitioners, meeting these criteria requires performing a rapid, fact-based analysis that is appropriately aligned to the business strategy behind the transaction.

Throughout this series, we demonstrate how to perform an analysis to support business transactions while avoiding common post-merger issues. The context is designed to straddle the line between technology analysis and business strategy, giving both business and technology professionals a holistic picture of technology’s impact on negotiations and post-merger valuation.

The series is initially structured around the 4 distinct Beacon Integration (BI) models of IT due diligence. There are 2 models for M&A, and 2 models for divestitures, all designed to produce transaction relevant results.  

BI Models:

• Current State Evaluation
• Forward Looking Due Diligence
• Buy-Side Divestiture Due Diligence
• Sell-Side Divestiture Due Diligence

In each section, we will outline how the principle of each BI model is based on producing objective/quantifiable results that can be provided quickly, without compromising valuable insight. The models leverage a combination of best practice tools ranging from ISO, through Six Sigma, to COBIT, adopting attributes from each that can fit within the tight working constraints of a due diligence. 

We continue the series by providing ongoing commentary on how to perform an IT due diligence under different circumstance, such as evaluating innovative technology and applying due diligence techniques in a turnaround situation. Both of which requires introducing different analysis and valuation methods.

Technology Due Diligence – Series Index:

Readers, be sure to bookmark this page, as it can be used as a menu to jump to major sections that they are interested in. We will activate the hyperlinks below of upcoming sections, as the posts become available, so stay tuned!

• Two Approaches to M&A IT Due Diligence
• Type I – the Current State Evaluation
• Type II – the Forward Looking Due Diligence
• Type III – Buy-Side Divestiture Due Diligence
• Type IV – Sell-Side Divestiture Due Diligence
• Innovative Technology Evaluation
• Distressed Analysis Techniques 
• Legal Requirements for Performing IT Due Diligence
• The Due Diligence Questioner (including a template download)
• Using the Due Diligence to Achieving Post-Merger Success

Please note: To gain the most value from each post, it is recommended to read the posts sequentially, as it is common for posts to reference earlier work. However, a reader will be able to grasp basic subject specific concepts if reading a post individually.

Continue to part 1 of our ongoing series on Technology Due Diligence, Two Approaches to M&A IT Due Diligence.

The Two Approaches to M&A IT Due Diligence posting is the first part of an ongoing series on performing M&A Technology Due Diligence.  Here, we draw distinctions between two different types of M&A IT due diligence and correlate their use to business strategy.  Additional postings will provide in-depth commentary on procedures and practices of each type of due diligence.

Before any IT Due Diligence can begin, the correct analysis approach must first be chosen.  Fundamentally, all due diligences are intended to reduce investment risk by removing uncertainty, and by providing the information investors needs to make informed decisions. The key for IT due diligence practitioners is selecting an approach that fits the M&A driver. 

There are two general types of M&A due diligence analyses that can be conducted when evaluating a target company’s IT.  A Current State Evaluation focuses on assessing a target company’s existing IT organization, processes, and deployed technology. A Forward-Looking Due Diligence focuses on the future state of a target organization based on deal objectives, such as how well distinct IT environments will mesh together in the post-merger phase, or how to transition to a completely new and distinct environment such as a sourcing provider. 

Deciding what approach to take often depends on the transaction premise, which also generally falls into one of two categories: an institutional investment, or an institutional merger. These classifications are not based on how a deal is financed, as is typically done, but rather on the business strategy behind the transaction.

Investors such as buyout sponsors, private equity groups, or turnaround specialists are likely conducting an institutional investment (sometimes referred to as a strategic investment). Achieving their post-merger objectives usually calls for leaving the company relatively intact and transforming it from within.  This type of transaction necessitates a Current State Evaluation due diligence approach.

Institutions, on the other hand, usually purchase companies with an objective that calls for merging the business to achieve synergies. The premise usually entails gaining market share, cutting operating costs, or acquiring a capability.  However, it’s often a combination of all three. Nevertheless, this type of transaction necessitates a Forward-Looking Due Diligence. 

Using the nature of the acquirer as a means to determine the business strategy behind the transaction does not always provide an accurate conclusion. Institutions sometimes conduct transactions as an investment or to create strategic synergies – no actual post-merger business or operational consolidation takes place.  The reasons for these types of transactions are varied, but liquidity factors often play into maintaining distinct business. Under these circumstances, a Current State Evaluation is the more appropriate approach to take.

It’s more infrequent, but the entities that usually partake in institutional investment can also throw a curve ball.  A private equity group may wish to consolidate two companies within its portfolio or to create shared services entities that span across its portfolio of companies. These types of activities would be better supported through a Forward-Looking Due Diligence.

Selecting the wrong due diligence approach will undermine the entire process and could lead to post-merger issues.  It is therefore imperative that technology due diligence practitioners start out on the right foot by clearly determining and understanding the business strategy of the acquirer. With the premise of the transaction fully understood, only then can the technology analysis process begin. 

Continue to posting-3 of our ongoing series on M&A Technology Due Diligence, Due Diligence Type I – the Current State Evaluation.

The objective of any M&A due diligence is to reduce buyer exposure by providing the basis to make informed M&A decisions. When post-merger plans call for maintaining an autonomous technical environment, meeting this objective necessitates using a Current State Evaluation due diligence approach.

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The focus of a Current State Evaluation is on understanding the target’s existing Information Technology (IT) proficiency and risks. The evaluation is comprised of four areas of concentrated discovery known as IT Due Diligence Focus Areas. These four areas represent a complete cross-section of a corporate IT environment.

Each area is evaluated using methods carefully selected to facilitate a rapid, yet accurate, assessment to meet the time demands of dealmakers. This requires using different methods for each.

IT Due Diligence Focus Areas:

Organizational Evaluation – During this evaluation, the organization’s IT management and senior most technical experts are evaluated as a leading indicator of the technology organization. The evaluation concentrates on job qualifications such as experience level and technical aptitude.

Processes & Routines – Here, extracts of the COBIT framework are used as a basis to analyze the 34 functions that define the activities performed by an IT organization. Each is evaluated on sophistication level and effectiveness.

Application Portfolio Evaluation – This focus area leverages software quality analysis guidelines outlined by the International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC). The emphasis is on determining an application portfolio’s “quality” using 25 pre-defined measurement criteria.

Infrastructure Evaluation – Spot-checks are used to examine the underlying nuts and bolts that support a company’s IT such as the network and servers. The evaluation is centered on areas that could represent buyer exposure or lead to post-merger issues.

The correlation between the focus areas ensures thoroughness and provides a critical congruency function. After conducting these evaluations, IT due diligence analysts will have discovered either positively or negatively:

1. If the IT management and technical experts are qualified for their positions.
2. If the IT organization’s talents are being properly applied through sound processes to deliver services, mitigate risk, and contain costs.
3. And, if the applied talent and processes are “resulting” in effectively deployed IT that is appropriately aligned to meet business objectives.

Throughout the evaluation, additional scrutiny is given to key risk factors such as information security, staff flight, and compliance adherence. Factors that have historically resulted in financial exposure and/or post-merger issues are also given additional scrutiny.

Armed with this quantifiable insight into a buyer’s technology risk factors, IT due diligence analysts are able to provide dealmakers actionable-intelligence that gives them an edge at the bargaining table. A valuable advantage that contributes to achieving a successful transaction and a positive post-merger valuation!

Continue to posting-4 of our ongoing series on M&A Technology Due Diligence, Technology Due Diligence – IT Leadership Assessment – Staffing Proficiency