M&A Case Study: CUNA Mutual

Two years ago, CUNA Mutual Group decided it needed a standard playbook for IT's role when the company is buying or selling a business. Good thing. Amid the financial services turmoil of 2009 and 2010, CUNA Mutual, which provides services to credit unions, ended up doing nine transactions. "We would've probably been crushed by those," says CIO Rick Roy. Here are some of the main ideas in CUNA Mutual's M&A playbook for IT.

When Buying A Business

The first focus is on what IT-related intellectual property the target company owns. There are two big risks, says Roy. One is you think you're buying all the IT to run a business, but you actually need to license some from a third party--a hidden cost.

Second is execution. Can you run it on day one? If you have to work with a third party, do you cut a long-term contract, or one just long enough to find a replacement? That can depend on a key strategic decision of whether to integrate the new business' systems with CUNA Mutual's, or run it standalone.

Lesson learned: Nail down document integration assumptions. Things change, so a year down the road, everyone might wish they'd integrated, when at purchase everyone agreed to run systems standalone. Head off finger-pointing. "We can change the assumptions, that's not a problem," Roy says. "The problem is if we change the assumptions subconsciously, and someone says, 'Why haven't we integrated it further?'"

When Selling A Business

The buy side gets the attention, and the selling side's too often neglected, Roy warns. One critical area is how CUNA will work with the buyer post-close--will it run systems for some time in the transition? Usually that takes a separate contract.

Second, the company now has a standard way to approach vendors when it will run systems on a buyer's behalf for some time. Vendors make such arrangements all the time but, since there can be hundreds of contracts, CUNA Mutual finds efficiency counts, and it benefits from its own standard approach.

In either buy or sell, IT needs to understand the corporate cultures involved, and the emotions. Deals are a delicate dance. "You don't want to land a due diligence team on the beach when the seller's not ready for it," he says. "It's amazing how many deals blow up because the sequencing gets out of order."

Beyond the formal playbook, Roy also has to meld M&A goals with long-term IT strategy. Business units might be in a rush to integrate. Yet Roy might see possibilities coming in the near-term--say, replacing an in-house system with a software service in a year or so--that make it worth waiting.

Go to the main story:
8 Reasons CIOs Must Walk Point On M&As*

InformationWeek: Feb. 14, 2011 Issue

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