1. Get In Early
As much as business executives pay lip service to the integral role of IT in all aspects of operations, their actions show it's not a priority. A potential M&A deal without the CFO's participation from the get-go? Never. A done deal dropped in the CIO's lap? Commonplace.
"CIOs are typically late in the game whenever there's any type of M&A activity," says Julian E. Lange, a professor of entrepreneurship at Babson College. "All too often the CIO is brought in after a letter of intent and has to catch up quickly." Lange should know--he's been involved with dozens of transactions over his 40-year career, starting way back when he was CEO of Software Arts, which created VisiCalc.
"If a CIO is getting shut out of the process, he needs to take a hard look at his core business skills, beyond being a great technologist," Lange says. "Get out there and prove IT's worth. Be creative, and actually help find deals. Don't wait to be asked."
For technology-centric firms, the link between M&A and IT is obvious. These companies live and die by their tech investments, which are often a core part of their development plans. For Simon Howell, director of business development at e-commerce vendor Ariba, IT plays a pivotal role. "We bring in our technology teams very early, including the initial identification of targets," says Howell. Ariba has completed eight acquisitions in the past 10 years and recently announced plans to buy supply chain vendor Quadrem.
But most of us aren't working at tech firms. Banking, manufacturing, retail, and a whole host of other industries account for the bulk of all M&A transactions (see a breakdown in the chart below). IT-centric deals made up less than 10% of global M&As in 2010.
Companies that aren't used to tapping their technologists for business insights need to realize that the entire IT team, not just the CIO, can play a pivotal role in identifying buyers or sellers in any industry. That's because IT pros tend to move within a particular vertical market, giving them unique insights into the operations of potential acquisition targets. Technologists regularly share strategies with industry peers, opening another avenue for scouting.
Of course, a major part of the pre-deal process will depend on the drivers for a sale or acquisition. Adding a new service or product to your company's portfolio often requires adopting some of the target company's technology. However, if the sale or acquisition is more about increasing market share, expanding sales, or gaining nontechnology engineering talent, you'll have to ask yourself this hard question: Just how much value does your IT platform bring to the equation?