by Amanda Wilkie, Consultant
I'm no stranger to mergers and acquisitions. From participating in a merger of equals resulting in a Top 10 firm to driving all of the technology aspects of five post-merger integrations during my time as CIO, I've seen the good, the bad and the ugly of acquisitions.
Often, decision-makers in an acquiring firm focus on aspects of the merger or acquisition they understand best: location, specialization, practice areas and price. Technology is something they assume can be dealt with once the ink is dry – an assumption that can end up costing them dearly down the road.
I recommend the following to avoid unpleasant – or even potentially costly – surprises after a merger or acquisition.
Get IT involved as early as possible
If your IT team has enough time to plan for the merger or acquisition properly, Day One can look as easy as flipping a switch and having both the acquiring firm and the target online and operating as one. Of course, it's never that easy, but it can LOOK that way with enough time.
Firm leaders often underestimate the amount of lead time necessary to handle vendor-related requests and get the target firm on the new network. It can take 12 weeks or more to get a new office on the firm's network in many cases. This isn't something you can request in December and have up and running on January 1st.
Reviewing budgets and licenses is another area where your IT leader can provide a lot of value if you involve them early enough. I've seen firm leaders discover that the target firm hadn't properly licensed its software – an issue that wound up costing the acquiring firm hundreds of thousands of dollars that they hadn't budgeted for. Suppose the IT leader had been able to review budgets and licensing during the due diligence process. In that case, they could have given firm management a heads up that there was an expense they needed to plan for rather than experiencing a major hit to their budget in Year 1.
I’ve never known IT to find anything that will make or break the deal, but they can prepare you for what's to come.
Rip and replace is better than a slow burn
Rip and replace integration, where you dismantle the target firm's IT infrastructure and immediately implement the acquiring firm’s systems, is always preferable to a slow burn that keeps disparate systems running in parallel – although it's not always feasible due to time constraints or environmental complexities.
One firm I worked with had two acquisitions take effect on January 1st of the same year – one was 50 people locally, and the other had 120 people in another state. Because of the timing, logistics and complexity, we couldn't do rip and replace in both locations. We chose to do a rip and replace for the local office and let the other firm operate on their existing systems for that first tax season. It was a valuable opportunity to watch rip and replace and slow-burn play out side by side.
The rip and replace firm had a difficult first tax season, with all new technology and processes and very little training time. But the next tax season was smooth sailing.
The slow burn firm, on the other hand, had two challenging busy seasons. During year one, they couldn't tap shared resources with any other offices and didn't feel like they were part of the firm. That summer, we did deconstruct the legacy environment, so they were operating with all new technology and processes the following summer.
Furthermore, if a firm is looking to be acquired, they typically are not investing in their technology, and there's not much value in keeping their existing technology. Whenever possible, plan on ripping and replacing. It gets everyone on the same systems and avoids an "us versus them" attitude from taking hold.
Assess the talent asset
Another mistake firm management sometimes makes in a merger or acquisition is assuming they don't need the target IT team's skills. I've seen firms immediately lay off all of the target firm's IT people or transition their IT Director into a lower level support role because the IT Director's role is already full.
It's critical to assess the target firm's human capital just as you would its assets, liabilities, client list and other aspects of the deal. Nobody knows that firm's technology or processes as well as the existing IT team, and you can often find some excellent depth of knowledge there. Keep them around, respect their knowledge and experience. Either make them a part of the team or have a transition plan for them, including a stay bonus to get you through the initial integration.
Don't let IT take a back seat in your M&A process. Including them early, giving them time to rip and replace technology, and holding on to the target firm's IT talent will make your merger or acquisition a success and pay off in the long term.
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Amanda Wilkie, Consultant at Boomer Consulting, Inc., has a computer science background, but she’s not your average geek. With two decades of technology experience, Amanda has spent 13 years driving change and process improvement through innovative technology solutions working across firms of varying sizes in the public accounting profession. She has held strategic leadership positions in firms ranging from Top 50 to Top 10 including her most recent role as CIO of a Top 30 firm. Amanda is a recognized expert in the profession who regularly speaks and writes on blockchain and cryptocurrency and their impact on the profession.
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