Open the pages of your business journal, and not a week goes by without some mention of a major Global 2000 takeover, merger or acquisition. Look into the results of some of these deals and, according to a recent BBC news report into a KPMG survey[1], over half of them “actually destroyed shareholder value”. Planning for success in the shadow of such a disastrous run-rate is high on the CIO agenda. We turned our attention to M&A during the April 2008 First Friday[2] webcast, discussing many aspects of this important industry topic, and how Micro Focus can help.

As most of us know, the conceptual benefit of a merger is often written as an equation: 1+1=3, where the merged company is “greater than the sum of its parts”. Increased market share and shareholder value are the primary business objectives. However, this objective is built on a set of assumptions about the success of the merger from an operational perspective. Nowhere is this truer than in IT, where two hitherto unrelated arrays of people, processes and technology usually need to be consolidated into a single, lower-cost, functional entity.

The challenge faced by the combined organization in achieving “merger success”, is that the initial business case for the deal would have been planned to include specific milestones and deadlines in terms of organizational integration and cost reduction. This plan may or may not have been based on fully available relevant factual information. If it turns out that assumptions were incorrect, this could throw the entire basis for the merger plan into question.

The question then, is how the CTO and his team undertake appropriate planning for a Merger, to first ensure the plan is valid, but also that the execution of that plan is a success? Let us discuss a typical high-level life-cycle that can apply, regardless of the M&A approach, to establish some best practices.

The pre-M&A phase is at a point in time where there may be an agreed company strategy of M&A, but little is known about the target. So, this preliminary “getting ready” step must focus on two primary facets: understanding the current (“acquirer”) IT infrastructure; secondly, establishing a list of key questions you need to know of any would-be target IT organization. Both facets require comprehensive understanding, at a technical and operational level. Modelling the current application landscape and determining business value provided is a critical step in establishing current status. Identifying key business processes may also help uncover any deficiencies or weaknesses in the current IT arsenal, which may in turn assist integration planning. By providing the means to automatically identify and store vital technical information and gather stakeholder input on business value, Micro Focus supports this first step.

Subsequently, the company may wish to scrutinize an acquisition target. There follows a period of “Due Diligence”, often subject to aggressive timescales. Two objectives established for this phase are, first, to gather as much “application information” about the target organization, and, second, to formulate an outline IT Integration Plan. For the initial “application information” exercise, there is little or no knowledge of the systems being examined, nor sufficient assistance to provide this information. To identify and scrutinize the applications is extremely tough to achieve, therefore any method of streamlining, simplifying and automating this effort is welcomed. By providing the means of capturing, storing and measuring application information (per the pre-M&A phase), Micro Focus’ solution promotes simplification and consistency. This helps when constructing the outline integration plan; also the same metrics, terminology and descriptors can promote a common understanding and effective comparison and performance indicators.

The final phase is the Integration phase, and clearly this builds on the already-established “source” and “target” IT system information, and allows this information to be consolidated as the Integration project unfolds. The Micro Focus solution assists in monitoring the integration itself, and can also help provide knowledge transfer support (for consolidation of development teams) and technical documentation (often these pieces are out-of-date or missing entirely).

Gartner noted, as far back as 2005, that “Failure sets in when the execution slows or stops after encountering the reality of the unknowns missed during due diligence.”[3] By establishing baseline benchmark information and appropriate visibility, and by supporting the exacting planning processes involved, the Micro Focus APM solution is a potentially invaluable asset in an organization’s M&A strategy. Download our M&A brochure here.

View the webcast.

A frequent contributor to 'In Focus', Derek Britton is Senior Product Director at Micro Focus.