CIO Considerations For MA Framework - Whitepaper

A Microsoft Services Enterprise Architecture Paper
CIO Considerations for

Mergers & Acquisitions:
Abbreviated for External Readers
Abstract:
This paper outlines insights gleaned from CIOs and other IT executives experienced in M&A transactions,
culminating in an objective M&A Framework useful to CIOs as they prepare their teams to execute
future M&As. The framework is organized step-wise by six sequential phases informed by various
technology, people, process, and/or composite matters. The paper thus serves as a general road map
that a CIO can use to proactively identify challenges, navigate an M&A project, and ultimately help
achieve the desired synergies and goals of the new business organization.
Microsoft Services
Authors:
Andrey Esipov, Allesondra Gronager, Swati Kirti, Pooja Sinha, Alejandra Yeomans
(University of Arizona Eller College of Management graduate team), and Dr George Anderson
Publication Date:
January 2012
Version:
1.0
We welcome your feedback on this paper. Please send your comments to the Microsoft Services
Enterprise Architecture IP team at ipfeedback@microsoft.com.
CIO Considerations for Mergers & Acquisitions
Acknowledgments
The authors want to thank the following people who contributed to, reviewed, and helped improve this
document.
Contributors, reviewers, and mentors:

David Spinelli, Bill Cunnane, Deepak Singh, Nannon Roosa, and Joe Valacich
© 2012 Microsoft Corporation. All rights reserved. This document is provided "as-is." Information and views expressed in this
document, including URL and other Internet Web site references, may change without notice. You bear the risk of using it.
This document does not provide you with any legal rights to any intellectual property in any Microsoft product. You may copy and
use this document for your internal, reference purposes. This document is confidential and proprietary to Microsoft. It is disclosed
and can be used only pursuant to a non-disclosure agreement.
Page ii
© 2012 Microsoft Corporation
Table of Contents
1 INTRODUCTION................................................................................................................................................. 1
2 VALUE OF MERGERS & ACQUISITIONS .............................................................................................................. 2
3 MERGERS & ACQUISITIONS FRAMEWORK ........................................................................................................ 3
3.1 PHASE I: PRE-PLANNING ................................................................................................................................... 4
3.1.1 Pre-Planning: General/Composite Processes ........................................................................................ 4
3.1.1.1 Pre-Planning: IT Alignment with Corporate Strategy ........................................................................................ 4
3.1.1.2 Pre-Planning: Identify Budget ............................................................................................................................ 7
3.1.1.3 Pre-Planning: Evaluate Legal and Compliance Risks ......................................................................................... 8
3.1.2 Pre-Planning: People –Centric Processes .............................................................................................. 8
3.1.2.1 Pre-Planning: Evaluating Organizational Culture .............................................................................................. 8
3.1.2.2 Pre-Planning: Identify Due Diligence Team ....................................................................................................... 9
3.1.3 Pre-Planning: Technology-Centric Processes ...................................................................................... 11
3.1.3.1 Pre-Planning: Evaluate IT Technical Capabilities .............................................................................................11
3.2 PHASE II: DUE DILIGENCE ................................................................................................................................ 11
3.2.1 Due Diligence: Assess Target of Acquisition ........................................................................................ 12
3.3 PHASE III: INTEGRATION PLANNING ................................................................................................................... 13
3.3.1 Planning: People–Centric Processes ................................................................................................... 13
3.3.1.1 Planning: Create Integration Management Team and IT PMO ......................................................................13
3.3.1.2 Planning: Develop Organizational Change Management Plan .......................................................................14
3.3.1.3 Planning: Create Staff Retention Plan..............................................................................................................16
3.3.2 Planning: Process-Centric Processes ................................................................................................... 17
3.3.2.1 Planning: Select & Prioritize Projects ...............................................................................................................17
3.3.3 Planning: Determine Schedule & Milestones ...................................................................................... 18
3.3.3.1 Planning: Create Risk Mitigation Plan ..............................................................................................................19
3.3.3.2 Planning: Evaluate Vendor Relationships and Contract ..................................................................................19
3.3.4 Planning: Technology-Centric Processes ............................................................................................. 20
3.3.4.1 Planning: Create Technology Rationalization Strategy & Systems Integration Plan .....................................20
3.4 PHASE IV: IT INTEGRATION.............................................................................................................................. 23
3.4.1 Integration: People–Centric Processes ............................................................................................... 23
3.4.1.1 Integration: Implement Organizational Change Management Plan ..............................................................23
3.4.1.2 Integration: Implement Staff Retention Plans.................................................................................................24
3.4.2 Integration: Technology-Centric Processes ......................................................................................... 25
3.4.2.1 Integration: Integrate IT Infrastructure and Systems......................................................................................25
3.4.2.2 Integration: Perform Data Migration ...............................................................................................................26
3.4.3 Integration: General/Composite Processes......................................................................................... 28
3.4.3.1 Integration: Integrate Administrative Functions .............................................................................................28
3.5 PHASE V: READINESS & ADOPTION ................................................................................................................... 29
3.5.1 Readiness & Adoption: People –Centric Processes .............................................................................. 29
3.5.1.1 Readiness & Adoption: Manage IT Organizational Change ............................................................................29
3.5.1.2 Readiness & Adoption: Conduct Employee Training and Readiness ..............................................................31
3.6 PHASE VI: POST-INTEGRATION REVIEW .............................................................................................................. 32
3.6.1 Post-Integration: Process-Centric Processes ....................................................................................... 32
3.6.1.1 Post-Integration: Assessment of M&A Value ..................................................................................................32
3.6.2 Post-Integration: General/Composite Processes ................................................................................. 33
3.6.2.1 Post-Integration: Conduct Post-Mortem and Identify Lessons Learned ........................................................33
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4 CURRENT TRENDS IN M&A ............................................................................................................................. 35

5 SUMMARY ...................................................................................................................................................... 37
5.1 APPENDIX A: WORKS CITED............................................................................................................................. 38
5.2 APPENDIX B: SURVEY RESULTS REPORTS ............................................................................................................. 39
5.3 APPENDIX C: DUE DILIGENCE CHECKLIST ............................................................................................................. 39
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1 Introduction
Currently, between 50 percent and 70 percent of all Mergers & Acquisitions (M&A) transactions fail to
create incremental stakeholder value. Although there are many reasons for this low rate of success,
failed post-merger integration stands out as the most common root cause of the failures 1. CIOs involved
in M&A transactions need to be equipped to respond to strategic change events by facilitating the
potential integration of IT capabilities across firms. To be successful, both structured guidelines and a
framework to navigate IT integration complexities are needed.
This white paper provides IT executives with an M&A framework that can greatly assist CIOs who are
navigating M&A integration complexities, ultimately helping to enable desired integration synergies. The
framework addresses the essential role that IT must play in the full cycle of M&A activities, from pre-
merger planning to post-merger integration, toward the goal of increasing stakeholder value from the
deal. The framework defines vital processes with clear inputs and outputs throughout the following six
M&A phases (where governance, operations, and other fundamental and important processes are
assumed to exist “underneath”):
 Pre-planning
 Due diligence
 Planning
 IT integration
 Readiness and adoption
 Post-integration review
Activities within the framework address the people, process, and technology aspects of M&A
transactions. The framework was developed through extensive secondary research, the results of a
survey conducted among CIOs and IT executives previously involved in M&A transactions. Survey
participants reflected on what went wrong, what was missed, and they shared key advice on M&A
transactions. Following the processes within the framework discussed in this white paper positions CIOs
to better achieve desired synergies from M&A activities to meet their business goals.
1
Peter Blatman, Mark Bussey, Jeff Benesch, The Role of Information Technology in Mergers and Acquisitions,
Deloitte Consulting LLP, 2008
Page 1
2 Value of Mergers & Acquisitions

The ultimate goals of M&A deals vary, but they are typically focused on increasing shareholder value
through gaining market share, expanding into new markets, acquiring new products, or optimizing a
component of the value chain. The key forces and synergies driving M&A transactions can be
categorized into the following incentives2:
 Increase business scale. In an industry that is consolidating, the size of a firm drives economies of
scale and market presence.
 Expand product or market breadth. Companies use M&As to expand their product or service
offering in a faster and more economical way than developing their own products or services
themselves. Through this type of acquisition, distribution channels also are expanded, which usually
leads to offerings in further markets.
 Drive efficiencies that reduce the cost of products or services. One key driver to M&A success is to
run the acquired firms more efficiently. This can be achieved by consolidating functions, such as
accounting, IT, and customer service to reduce costs.
 Acquire assets, technology, knowledge, and talent. A primary driver of M&A activity is to acquire
assets, technology, processes, knowledge, or talent that organizations can use to gain position in the
market.
2
Cullen, Alex. Mastering M&A: The CIO’s Game Plan, Jan 9, 2009. Forrester
Page 2
3 The Microsoft Mergers & Acquisitions Framework v1.0

To better prepare for an M&A transaction, fully realize its intended value, and achieve desired synergies,
IT executives can take advantage of the processes outlined in the M&A Framework v1.0 described and
illustrated in this white paper (note: v2.0 released May 2013 and v3.0 pending based on extensive global
use and partner feedback).
Figure 1. M&A Framework v1.0

The framework is designed to help IT executives navigate integration complexities throughout the M&A
life cycle. While you can apply this particular framework to nearly any M&A, it is most suited for
consolidation, combination, and transformation projects that typically align with the six M&A phases:
 Pre-planning. Pre-planning activities set the stage for M&A transactions performed in this phase.
How IT will align with corporate M&A strategy is decided. Initial plans for dealing with organizational
culture issues are identified, budget is estimated, potential risks are evaluated, the new
organization’s technical capabilities are identified, and the M&A due diligence team is formed.
 Due diligence. A detailed assessment of target of acquisition is performed in this phase.
 Planning. The following is accomplished in this phase: the project integration management team is
established, an organizational change management plan is outlined, the M&A schedule and
milestones are documented, projects are selected and prioritized, a risk mitigation plan is created,
vendor contracts are evaluated, a system integration plan is documented, and a staff retention plan
is established.
 IT integration. Actual IT integration activities occur in this phase. Among them are: the
implementation of a change management plan, integration of IT infrastructure and business
systems, integration of administrative functions, implementation of staff retention plans, and data
migration.
Page 3
 Readiness and adoption. Managing IT organizational change and preparing affected employees for a
new working environment primarily occurs in this phase.
 Post-integration review. The actual post-M&A value is assessed in this phase, and lessons learned
from the M&A transaction are identified and documented.
How well companies navigate each phase during the M&A process—especially as they apply to IT
integration—plays a large part in determining whether or not the M&A ultimately achieves the expected
results.
The framework discussed in this paper is intended to help CIOs navigate these phases. Figure 1 earlier
graphically depicts all of the M&A phases and with their corresponding processes. Activities within the
processes are categorized as people-centric, process-centric, technology-centric, or general/composite
(those that reflect elements of people, process, and technology activities). Each phase and its respective
key processes are examined next.
3.1 Phase I: Pre-Planning

Failure to perform the following can result in a less-effective or unsuccessful M&A transaction:
 Lack of a clearly defined strategy
 Failure to identify desired synergies
 Underestimation of the importance of organizational culture
 Comprehensive M&A pre-planning helps minimize these risks.
The pre-planning phase focuses on defining the goals, strategies and initiatives of the acquiring
organization, evaluating the impact of changes to both organizational cultures, determining initial risks
associated with the M&A transaction, evaluating organizational IT capabilities, and establishing initial
M&A teams. The process activities within each phase split into four categories as outlined previously:
people-centric, process-centric, technology-centric, and general/composite.
3.1.1 Pre-Planning: General/Composite Processes
3.1.1.1 Pre-Planning: IT Alignment with Corporate Strategy

Organizations differ in their motivations to pursue M&A deals. Some undertake an M&A transaction to
combine two or more separate entities into a new business model. Other organizations are interested in
acquiring knowledge or talent that they do not currently possess. Moreover, there are also consolidators
and revenue-seekers who mainly seek to gain operating value from the M&A transaction. Regardless of
the objective, involving the CIO as part of the executive team from the start, being very direct in
communicating processes and decisions, and helping to determine whether the organizational
objectives can be realistically met, are all imperative to M&A success 3.
Process Activities and Key Considerations

Any organization involved in an M&A transaction seeks synergies regardless of its overall objective.
Differing M&A goals and corporate strategies among the organizations are the dominant drivers of post-
merger integration focus, complexity and intensity. The greater the synergies that the organization is
seeking, the more complex the post-merger integration will prove to be. Companies that set a high level
of ambition/expectation for post-merger synergy must place significant focus on external stakeholder
management and integration management throughout the M&A life cycle.
3
University of Arizona Eller School of Business CIO M&A Survey, October 2011
Page 4
The key process activities are:

 Determine the business goals and strategy of the M&A
 Determine the M&A integration approach
 Identify the terms of success
Creating organizational synergies can provide significant benefits to companies pursuing M&A activities.
Some potential benefits include4:
 Expanded technical and management capabilities
 Enhanced portfolio diversification
 Reduced costs through economies of scale
 Increased market share
 Improved market position
 Greater knowledge or access to talent
 Increased assets
 Deeper value-added integration along the value chain
These benefits share one factor in common: they are each realized by aligning the planning and
execution of pre-merger and post-merger activities with corporate strategies and goals.
In general, there are four approaches that can be applied to most M&A transactions5:
 Consolidation. Implements one company’s strategy, structure, processes and systems into the
acquiring company.
 Combination. Selects the most effective processes, structures and systems from each company to
form an efficient operating model for the new entity.
 Transformation. Synthesizes disparate organizational and technology pieces into a new whole.
 Preservation. Supports individual companies or business units in retaining their individual
capabilities and cultures.
The approach a company chooses depends on its goals for the new entity. More specifically, M&A
business objectives usually reflect the acquiring company’s acquisition goals. Table 2 later illustrates
how the adopted integration approach needs to align with and organization’s business objectives and
corporate strategy.
4
Ibid
5
Ibid
Page 5
Table 1. Approach to Match Reasons for Acquisitions

Key: = Not applicable  = Applicable ? = Applicable in some situations
Before the actual M&A process starts, it is very important for the organization to decide what
determines the success of the M&A. Industry literature suggests selecting two or three milestones
which, when achieved in a pre-decided timeline, are synonymous with M&A success. For example, the IT
team may determine the M&A to be successful if 80 percent of the IT systems of the two companies are
merged within the first six months and all important services continue to be provided to customers.
Advice from the Pros: IT Alignment with Corporate Strategy6

Current CIOs and IT executives surveyed stated that strong leadership and early CIO involvement in
M&A activities is absolutely critical to M&A success.
What Went Wrong: Poor Leadership

“<removed for external readers>.”
What Was Missed: Business Changes

Other surveyed IT executives agreed that the CIO should be cautious about agreeing to IT reductions
related to consolidations and synergies that depend on business changes. If the business does not
change and IT moves ahead and makes cuts, the IT area ends up under resourced while supporting
the "two" companies.
Key Advice: Strong Leadership
6
Page 6
Strong leadership from the CIO and CEO is needed to make key decisions quickly. As CIO, get involved
early as possible. Meet the key people, be very direct in communicating processes and decisions, and
determine if the needs of the business can realistically be met.
3.1.1.2 Pre-Planning: Identify Budget

M&A transactions are immense endeavors with a lot of unknown variables, and underestimated
budgets are common. It is imperative that the project teams establish preliminary cost estimates in the
pre-planning M&A phase.

The best available data to use in estimating M&A transition costs lies within the acquiring company. The
CIO can develop representative cost models to use in the initial budget estimation. The key process
activities are:
 Estimate infrastructure expenditures
 Estimate new hiring and retention costs of employees
 Estimate costs of the new IT portfolio system
Three unique sets of financial data are needed for M&A budget estimation:
 Capital costs to execute the acquisition
 Expenses to execute the acquisition
 Ongoing operating cost
Transition costs identified earlier can be estimated by using known cost profiles, that is, the information
the acquirer gathers about itself and adjusts based on the rather limited publicly available information
about the target company. This budget estimation approach works best for the “consolidator” M&A
approach. A foundation set of scalable parameters based on publicly available information includes 7:
 Revenue. Usually the target of the acquisition and the acquiring firm are in the same industry.
Revenue can be translated to the number of transactions that, in turn, drive the scale of the IT
infrastructure to support business operations.
 Number of employees. Drives costs associated with the employee desktop infrastructure (software
licenses required, help desk usage estimates, and so on).
 Geographical presence. Determines the degree of overlap with the acquirer’s geography. If a match,
then IT focuses largely on system migration and support, the telecommunications network, and
computing capacity. The less overlap there is, the more focus must be placed on extending the
network or adding new support capability, and possibly, IT system infrastructure support, especially
if it involves several countries.
 Sophistication. This is an option to introduce a factor to cover the possibility of the target having a
better IT infrastructure solution or operating environment than the acquirer.
The process of identifying the M&A budget offers the first opportunity to evaluate reasonable M&A
costs and helps construct cost scenarios. The objective of the later stages of M&A is to refine these
estimates and get them as accurate as possible.
7
Ibid
Page 7
Advice from the Pros: Identify Budget8
Key Advice: Budget Slack

3.1.1.3 Pre-Planning: Evaluate Legal and Compliance Risks

Legal concerns often are concentrated on the financial and operational aspects of the merging
companies and in many cases issues related to IT security, patents, IP copyrights, and so on are missed.
This issue was pointed out by one of the survey takers who stated:
This ignorance can be costly, but you can avoid it by focusing on the IT assets of the merging company in
addition to financial and operational liabilities.

While evaluating legal and compliance risks, find out early if there are long-term maintenance contracts
to continue or purchase. Proper evaluation of existing and acquired software licenses can cause
budgeting problems and will impact the M&A. Some of the key process activities helpful in avoiding this
situation are:
 Identify all cases regarding patents, copyrights, licensing, and so on.
 Identify risks associated with degree of compliance at both firms.
Advice from the Pros: Evaluate Legal & Compliance Risks9
What Went Wrong: Poor Legal Evaluation

Key Advice: Governance Training

A key recommendation is to complete governance training before starting to work in restricted areas
as it facilitates free flow of information.
3.1.2 Pre-Planning: People –Centric Processes
3.1.2.1 Pre-Planning: Evaluating Organizational Culture

Cultural issues can be extremely challenging, even in the smoothest of M&A transactions. Of the M&A
transactions that fail, 83 percent fail due to mismanagement of cultures 10. Difficulty in understanding
the organizational cultures of the participants of M&A transaction is detrimental to M&A’s success. The
8
Ibid
9
Ibid
10
Kelly, Cook, and Spitzer, Unlocking Shareholder Value: The Keys to Success, Mergers and Acquisition: A Global
Research Report, Sept. 15, 2011
Page 8
blending of organizations and cultures is not easy because no matter the industry, no two companies
evolve in quite the same manner. Each will each have different leadership styles and cultures.

To facilitate the transition to the newly-merged entity, each post-merger IT integration approach has to
deal with different management and cultural issues.
For example, there are three typical leadership styles in an IT consolidation:
 Authoritarian approach. Imposes the will of the acquiring company on the company being acquired.
The culture of the acquiring company is also imposed (as much as possible) on the new entity.
 Consolidation approach. The leadership style is more collegial and the corporate cultures mesh.
 Transformation approach. Often inspirational leadership that seeks out new ideas and synergies
more than with any of the other approaches. There often is a new corporate culture that is sculpted
from select parts of the prior cultures.
 Preservation approach. A respectful leadership style, with leaders of both companies who retain
autonomy with the cultures of both companies that remain largely unchanged.
The key activities within this process are:
 Gain in-depth understanding of the company’s organizational culture.
 Understand the acquired company’s work culture.
These issues directly affect how smoothly the post-merger IT integration will proceed. Management’s
understanding of its own organization’s culture and deciding which an M&A approach will be most
effective in meeting the goals of the M&A are vital to the success of the M&A.
Advice from the Pros: Evaluating Organizational Culture11
What Was Missed: Poor Evaluation of Culture

That is why spending appropriate time to resolve the ambiguity while evaluating organizational cultures
is extremely important.
Key Advice: Understand Organizational Culture

Cultural fit becomes a key factor after the merger transaction takes place and integration starts to
ramp up more quickly. Not understanding the organizational culture can be detrimental to success.
3.1.2.2 Pre-Planning: Identify Due Diligence Team12

The due diligence team, which evaluates the target of acquisition during the Due Diligence phase, is
created in the Pre-Planning phase.
11
12
Ibid
Page 9

The due diligence team should include experts from all areas of the business including financial,
technical, and legal. The key activities for this process include:
 Determine teams for conducting due diligence.
 Involve the CIO in the due diligence team.
Table 2. Pre-Planning Phase Processes, Key Considerations, Inputs, and Outputs
The CIO cannot be perceived as a “back order taker.” Instead, the CIO must be involved in the process
from the very start and possess a high level knowledge of the entire process and its status. This process
requires strong leadership to ensure that decisions taken are not only strategic, but also time sensitive.
Advice from the Pros: Identify Due Diligence Team
Page 10
What Went Wrong: NDAs

Key Advice: Effective Communication

A key recommendation, based on the findings of the survey, is to get involved as early in the process
as possible, meet the key people, and communicate very directly about the transactional
requirements and expected outcomes.
3.1.3 Pre-Planning: Technology-Centric Processes
3.1.3.1 Pre-Planning: Evaluate IT Technical Capabilities

Evaluating IT technical capabilities helps with the assessment of organization’s IT portfolio, identifying IT
capabilities and deficiencies, and assessing technology gaps and overlaps within the organization.

In most M&As, the systems of the acquired company differ from the company seeking the merger. This
leads to difficulty in identifying, mapping, and measuring the IT capabilities of the two companies.
Companies depending heavily on legacy systems take extra time and effort when merging to more
modern IT infrastructures. Assessment of the IT architecture’s flexibility uncovers possible integration
problems early in the M&A. Some of the key process activities include:
 Evaluating assets and IT portfolio.
 Identifying IT deficiencies.
 Assessing technology gaps and overlaps within the organization.
Evaluating IT technical capabilities also allows for designing the most effective and efficient IT
integration plan, and helps with synthesis of IT capabilities, which can assist in achieving economies of
scale through shared overhead with the acquired company.
Advice from the Pros: Evaluate IT Technical Capabilities13
Key Advice: Set Realistic Goals

Table 2 earlier summarizes the processes within the Pre-Planning phase (Phase I) along with key
considerations, inputs, and outputs.
3.2 Phase II: Due Diligence

After conducting an internal evaluation in the Pre-Planning Phase, due diligence of the target firm must
be completed. During the Due Diligence Phase (Day 0), the due diligence team evaluates all business
areas of the target firm. This is the single process in this phase.
13
Ibid
Page 11
3.2.1 Due Diligence: Assess Target of Acquisition14

Performing due diligence, especially with regard to information systems compatibility and integration
issues, is absolutely critical. When correctly performed, due diligence can help identify risks and
opportunities. The risks include sources of potential risk that require immediate action 15. Opportunities
to reduce costs, take advantage of resources or assets in new areas, and improve IT effectiveness and
increase business flexibility can be identified and pursued.
Moreover, during the due diligence process, required decisions or actions can be identified before any
significant progress on the merger or acquisition. Expectations can also be set. Finally, the due diligence
team has to confirm how much (or how little) compatibility there is between IT architectures and assets
of the merging entities.

As with the process of setting the strategy, there are critical success factors in performing due diligence
that can help improve the odds of achieving the expected benefits. Activities to establish these are to:
 Set a broad due diligence scope—from assessing the IT environment to assessing risk and identifying
potential synergies.
 Set the baseline—the knowledge base that must be in place to move forward with the M&A
process.
 Develop a due diligence checklist to make sure that all important areas are covered.
The bottom line is that IT due diligence has to result in a high-level action plan to mitigate identified
risks, resolve key issues, and capitalize on major opportunities.
Advice from the Pros: Assess Target of Acquisition16

If the time frame and budget permits it, perform the due diligence with as much detail as possible
because it helps uncover details vital to the success of M&A that could otherwise be missed. Important
details, such as information security requirements and practices are often overlooked.
What Went Wrong: Ineffective Due Diligence

What Was Missed: Small Details

Key Advice: Focus on Foundational Aspects

In order to make due diligence a success, IT executives should focus on foundational aspects that are
important to the business (for example the quality of information on customers, suppliers, products
14
Deloitte, The role of information Technology in M&A, page 4
15
Deloitte, The role of information Technology in M&A, page 2
16
Ibid
Page 12
and employees in the acquired company’s system), and evaluate the risks of performing due
diligence, such as the use of NDAs.
Table 3. Due Diligence Phase Processes, Key Considerations, Inputs, and Outputs
Table 3 earlier summarizes the processes within the Due Diligence Phase (Phase 2) along with key
3.3 Phase III: Integration Planning

After completing the assessment of the M&A target in the Due Diligence Phase, the Integration Planning
Phase must begin. Still within the Day 0 timeline, the Integration Planning Phase consists of determining
the plan of action to complete integration of IT systems technology and the new IT organization.
3.3.1 Planning: People–Centric Processes

Research indicates that some of the most unexpected and hard to resolve difficulties arising from an
M&A integration stem from cultural issues. Not planning for these issues can potentially magnify their
impact, and allow them to become a major setback in the integration process 17. Communication is key,
as both firms’ staff must be kept informed of important decisions. Strong leadership throughout the
M&A process has proven to be one of the most significant determinants of achieving expected results 18.
The CIO needs to be involved in process to avoid these communication and cultural issues.
3.3.1.1 Planning: Create Integration Management Team and IT PMO

An Integration Management Team consisting of key staff and consultants oversees and facilitates the
integration process. Because decision-making is key in an M&A, many firms create an Integration
Management Team or Integration Office, separate but closely aligned with the IT Program Management
Office (PMO).

The Integration Management Team makes key decisions regarding project priorities, creating schedules,
and determining available resources 19. Establishing this team makes it easier to manage the IT portfolio
to ensure both ongoing business needs and integration efforts are met 20. The key activities within this
process are:
 Identify key staff members needed on the Integration Management Team from both firms.
17
Cullen, Alex. Mastering M&A: The CIO’s Game Plan. Page 13
18
Ibid
19
20
Ackermann, Bryan. Post-Merger Champions. Page 2
Page 13
 Develop decision-making criteria to help make effective decisions quickly.

 Communicate key project decisions with the IT Program Management Office.
To effectively select the Integration Management Team, the CIO needs to consult the due diligence
checklist created in the Due Diligence Phase of the M&A timeline. More specifically, the CIO should look
at performance reviews, organization charts, and job descriptions to determine the Integration
Management Team roster and assign specific roles and responsibilities to the members.
Advice from the Pros: Create Integration Management Team & IT PMO 21
Current CIOs and IT executives surveyed believed the Integration Management Team is key to providing
leadership throughout the M&A. Quickly deciding who will be part of the Integration Team allows the
team to conduct planning and integration earlier.
What Went Wrong: Slow Decision-Making

What Was Missed: Communication

Key Advice: Make Quick Decisions

The Integration Management Team must provide decisive leadership, promote cooperation, and
collaboration. Their goals should be to provide the firm with the required IT support to accomplish the
vision and objectives of the merger.
We recommend that this team include a change coordinator, IT process engineers, enterprise
architects, and integration specialists. After the team has been determined, it can develop a
Responsibility Assignment (RACI) Matrix and form a strategy and related criteria to determine
whether to integrate IT departments.
3.3.1.2 Planning: Develop Organizational Change Management Plan

Developing an Organizational Change Management Plan can prevent cultural clashes from ruining the
M&A investment, and positively influence employee behavior and organizational culture.
Process Activities & Key Considerations

The Star Model outlined in Figure 2 later provides a useful tool to guide change management 22. The key
process activities include:
 Strategy. Outline the goals and objectives to achieve and the values and missions to pursue.
 Structure. Communicate the placement of authority in the new organization.
 Processes. Determine the decision making process and information distribution in the new
organization.
21
Ibid
22
Galbraith, Jay R., “The Star Model”
Page 14
 Rewards. Establish a rewards system.

 People. Determine human resource policies for new organization.
For the CIO, it is important to determine what activities the IT department will be responsible for in the
new organization to choose an appropriate organizational structure.
After the strategy has been developed, the CIO should outline the type and number of job specialties
that the IT department needs to function during and after integration. We recommend promptly
establishing and communicating changes related to power and authority in the department. Outlines of
how decisions are made and how information will be shared throughout the new department should be
created and communicated across both companies.
After the structure of the new organization is determined, the human resource policies of recruiting,
selection, rotation, training, and development must be created. These policies help generate the skills
and mind-sets necessary to implement the chosen M&A strategy, and build organization capabilities to
execute the strategic direction of the new company. Finally, we recommend implementing a rewards
system to retain the workforce. This is discussed in the following section "Create Staff Retention Plan."
Figure 2. Star Model
Page 15
Advice from the Pros: Develop Organizational Change Management Plan23
What Went Wrong: Culture Clash

A former Chief Architect cited culture clash as the reason that the M&A investment failed, stating:
Poor change management has the potential to cause the M&A to fail. To avoid culture clash, ensure to
properly plan and execute change management.
3.3.1.3 Planning: Create Staff Retention Plan

After an M&A is announced, the initial reaction of the IT staff often is concern for their jobs. Staff
retention plans can minimize the number of high-performing employees lost to other firms.

A CIO must quickly and clearly state how decisions on staff positions will take place 24. The key process
activities are to:
 Identify the top 10 percent of employees that the new organization cannot afford to lose.
 Develop retention plans to retain key employees.
 Communicate staffing position decisions quickly and effectively.
After identifying key staff, the CIO must develop a retention plan to keep them from potentially leaving
to a competitor. A retention plan can include giving bonuses, assigning mentors or buddies to staff.
Some firms even develop programs awarding bonuses to staff when milestones or cost savings are
achieved to align self-interests with integration needs25. For those displaced from the company,
planning job placement assistance can add value to the staff retention plan.
In order to select key staff and develop retention plans, the due diligence checklist can be referenced.
Past performance reviews, organization charts, job descriptions, and new job positions all factor into the
key employee list and staff retention plan.
Advice from the Pros: Create Retention Plans26

Many of the CIOs and IT executives surveyed indicated that a lack of staff retention planning resulted in
poor integration results.
What Was Missed: Staff Retention Plan

Key Advice: Direction from CIO
23
Ibid
24
Cullen, Alex. Mastering M&A: The CIO’s Game Plan. Pg. 13
25
Cullen, Alex. Mastering M&A: The CIO’s Game Plan. Pg. 14
26
Ibid
Page 16
CIOs should help all individuals involved, on both sides of the merger, to quickly understand their
roles, calm their anxieties, and give them concrete direction as rapidly as possible. When planning on
not keeping certain employees, provide this understanding early and help them plan.
To make the right staffing decisions, the CIO needs to fully and objectively understand the strengths
and weaknesses of the staff of the acquired company. The key staff retained should be those who fill
in the gaps where their knowledge and experience is needed, especially during integration.
3.3.2 Planning: Process-Centric Processes

In order to create the Systems Integration Plan, internal preparation needs to be conducted for the
integration process to run smoothly.
3.3.2.1 Planning: Select & Prioritize Projects

Selecting and prioritizing projects helps with evaluating the IT project portfolio and makes key resources
available where they are most needed for integration.

The CIO must decide which projects or growth initiatives 27 must continue outside the integration scope,
and what resources will be currently occupied by these projects. Fey activities to complete in this
process include:
 Identify which projects must continue outside the integration scope.
 Reprioritize and defer projects that interfere with integration projects.
 Determine key resources needed to accomplish integration projects.
Projects outside the integration scope should be a lower priority in M&A. These projects could add
distractions for management that needs to focus on integration success. All projects must be
reprioritized, and those that may interfere with integration need to be deferred (that is, planned
technology upgrades or ERP improvements28). In order to create the project priority list, the current
planned project list and project timelines must be evaluated.
Advice from the Pros: Select & Prioritize Projects 29
What Went Wrong: Failure to Understand Dependencies

Raymond Smith30, former IT Director, believes that dependencies need to be identified that will help
when evaluating a portfolio. In his M&A experience, he stated:
27
Ackermann, Bryan. Post-Merger Champions. Page 2
28
29
Ibid
30
Page 17
3.3.3 Planning: Determine Schedule & Milestones

Firms with a successful track record of M&A create detailed timetables for achieving key milestones
before beginning integration.

The firm’s executives lay out a timeline of when they want to see the synergies of the M&A realized. A
CIO must know this timeline and plan all integration projects accordingly. The key process activities are
to:
 Split IT integration project deliverables into phases.
 Plan critical milestones to the lowest level (for example when the acquired firms’ customers will be
transitioned to the customer service application).
 Develop integration project timeline.
IT integration project deliverables are further divided into the following phases31:
 Phase 1: Infrastructure integration has to be completed in this crucial phase. Conduct this phase
within the first 100 days of the M&A transaction.
 Phase 2: Data integration is performed in this phase, and it is usually completed in the first 6 to 12
months of an M&A.
 Phase 3: Full integration and re-engineering (if needed) of the IT processes is performed in this
phase to capture the ultimate synergies of the deal. The most complex projects, such as integrating
the ERP systems, are completed in this phase (the phase length depends on the complexity of the
project).
Consider the priority project lists and the CEO’s M&A timeline to properly create schedules and
milestones for M&A projects.
Advice from the Pros: Determine Schedule & Milestones32

The process of determining schedules and timelines was identified by CIOs and IT executives as critical
to an M&A integration plan.
What Went Wrong: Poor Scheduling

In the case of a healthcare company, the migration had to be executed over the course of one
weekend and determining a concrete schedule helped them accomplish the migration in the specific
time period.
“<removed for external readers>.“ – Global Program Manager Director SaaS
What Was Missed: Reasonable Timeline

Another concern identified is the development of timetables that are too optimistic. A retired CIO of a
Fortune 500 company described that many issues in M&A integration arise from overly optimistic
timelines.
31
32
Ibid
Page 18
“<removed for external readers>.“ – former CIO
Key Advice: Early CIO Involvement

Ensuring that the CIO participates in setting the executive M&A timeline early in the M&A discussions
is important.
3.3.3.1 Planning: Create Risk Mitigation Plan

Risk mitigation planning proactively prepares an organization for a possible IT disaster/disruption by
effectively managing risk assessment and integration strategies before integration starts.

In order to avoid potential IT disasters, the integration team should identify all potential risks that can
occur and develop mitigation strategies to avoid or overcome these risks. The key process activities are
to:
 Identify all foreseeable risks in integration process.
 Develop mitigation strategies to prevent or overcome the identified risks.
 Develop business continuity and disaster recovery plans for identified risks.
If the risk assessment reveals many high-risk interruptions, conducting dry runs of implementation tasks
can be useful33. The due diligence checklist should be used to investigate all areas where risks can occur.
Risks should not only be identified solely for the technical processes of integration, but also for the
softer areas of integration, such as change management, budget changes, or potential legal/ethical risks
that can arise. Draft business continuity and disaster recovery plans after thoroughly evaluating and
identifying foreseeable risks.
Advice from the Pros: Create Risk Mitigation Plan 34
What Went Wrong: Ignoring Risk Assessment

Key Advice: Expect the Unexpected

CIOs and IT executives also recommend to “expect the unexpected,” both in terms of time and
money. As described by then-CTO 35:
3.3.3.2 Planning: Evaluate Vendor Relationships and Contract

The process of evaluating vendor relationships and contracts consists of contacting the vendors for
negotiating or renegotiating existing and new IT contracts that will be required for integration.
33
34
Ibid
35
Involved the merger of an 800 person computer software vendor with $150 million in annual revenues that
acquired a 1,500 person software company with $250 million in annual revenues.
Page 19

After an IT infrastructure is determined, contact vendors to renegotiate contracts for hardware,
software, and services to reduce costs. The only process activity that must be completed is:
 Contact vendors to negotiate or renegotiate contracts.
By renegotiating contracts early, a CIO can avoid paying costly premiums for last-minute purchases36.
The due diligence checklist provides information on the IT contracts and services that exist at both firms,
which will help determine the list of contracts to negotiate, renegotiate, or continue. Some of the
contracts and services are:
 IT contracts
 Equipment
 Software applications services
 Outsourcing contracts and services
Advice from the Pros: Evaluate Vendor Relationships & Contracts37

Not understanding or thoroughly evaluating the existing IT contracts at both firms can result in major
drawbacks during the integration process.
What Went Wrong: Improper Contract Evaluation

3.3.4 Planning: Technology-Centric Processes

How to reorganize the IT infrastructure to best achieve specific M&A synergies is an important decision
for a CIO. Plans must be established to identify key issues, such as which technology platforms and data
architectures to implement, what cost savings can be further identified, and how the integration team
will resolve key issues.
3.3.4.1 Planning: Create Technology Rationalization Strategy & Systems Integration Plan
Creating a technology rationalization strategy and a systems integration plan assists with determining
how technology will be used to achieve the required M&A synergies.

The CIO and the integration team should map out the best way to integrate the different IT systems. The
key processes are:
 Determine areas where costs can be reduced.
 Select an integration strategy.
The IT department needs to assess the strengths and weaknesses of both firms’ IT infrastructures based
on the information collected in the Pre-Planning and Due Diligence phases. This will aid with
determining the best integration strategy. The most common system integration strategies 38 are to:
36
Pratt, Mary. Get Into the M&A Game. Page 18
37
Ibid
38
MIT- M&A Guide
Page 20
 Maintain the Status Quo: keep two separate IT systems.

 Pick a Winner: Select one IT system, and discard the other.
 Choose Best of Breed: Combine the strengths of each firm’s IT system into one.
 Develop New System: Replace both firms’ IT systems with a new one.
The end goal is to eliminate redundant hardware and software. The IT strategy should support the
synergies that the M&A is intended to deliver39. The plan addresses the following IT areas40 in detail:
 Safeguarding Information Security: Information security usually weakens during an M&A, allowing
the organizations to become vulnerable to malicious activities. According to Cognizant, information
security consolidation is the best approach to safeguarding the systems. This approach involves
aligning information security policies and implementing a strict information security regime.
 Consolidation of Technical Architectures: Involves reducing the cost and complexity of IT
architecture to capture planned synergies.
 Email and Workflow: Facilitates communication, collaboration, and data sharing.
 LAN and Wi-Fi: Determines which system will work best to be integrated throughout the entire
company.
 Disaster Recovery and Business Continuity Services: Among an organization’s most valuable assets
are its IT infrastructure and proprietary data. Losing these assets is a risk in any M&A situation, and
recovery solutions must be in place.
 Network Audit and Penetration Testing: A network audit is performed to ensure business
continuity, reliability, and security. This audit allows the CIO to plan for future improvements and
better IT investments.
The due diligence checklist, most specifically in the areas of infrastructure and applications, provides a
detailed outline of both firms’ systems, which will be used by the Integration Management Team to
devise a proper integration strategy. The technology gaps assessment will also provide useful insight to
determine the integration strategy.
Advice from the Pros: Create Systems Integration Plan41

Many CIOs and other IT executives recognized that they failed to conduct timely, sufficiently detailed, or
efficient Integration Planning.
What Went Wrong: Poor Integration Planning

What Was Missed: Early Integration Planning

Another CIO/IT Executive stated that he should have recognized the importance of product
integration planning well in advance of executing an M&A transaction.
39
Pratt, Mary. Get Into the M&A Game. Page 18
40
Mani, Ramji. Cognizant White Paper: Overcoming IT Challenges in Mergers and Acquisitions. Pages 2–5
41
Ibid
Page 21
Table 4. Planning Phase Processes, Key Considerations, Inputs, and Outputs
Page 22
Key Advice: Develop In-Depth Integration Plan

Some key advice outlined in the survey responses was to figure out ahead of time how much
integration needs to be done and communicate it from the start. The CIO/IT executives mentioned
that it is better to be honest about integration control and let back a little, than to give an
organization the impression it has more control than it does. This person added that migration
planning should be developed by each organization to avoid fallbacks.
When determining an integration strategy, we recommend to not just consider the assets, processes,
and procedures, but to also get to know how people use systems on a daily basis. Moreover, have a
model prepared in advance that determines how systems at the target firm will be assessed,
integrated, or decommissioned.
Table 4 earlier summarizes the processes within the Planning phase (Phase 3) along with key
3.4 Phase IV: IT Integration

After the Integration Planning Phase is completed within the “Deal Announcement to Close” phase, the
IT Integration Phase starts. This phase is a part of Day 1. IT Integration is a slow and gradual process in
which the individuals from both organizations learn to co-operate in the transfer of strategic
capabilities42.
However, “three out of four mergers don’t meet expectations, and it’s not for lack of work by the people
that have to do IT integration,” says Bob Cawly, senior vice president of value services at META Group,
Stamford, Connecticut43.
3.4.1 Integration: People–Centric Processes

Research shows that human resource issues are one of the biggest challenges in achieving a favorable
outcome in an M&A. Addressing these issues early, strategically, and with discipline can help achieve a
successful M&A. The success of a merged organization not only depends on aligning the culture, but also
on effectively implementing change management and staff retention plans.
3.4.1.1 Integration: Implement Organizational Change Management Plan

The change management plan created in the Planning Phase of Day 0 helps achieve the mergers
objectives within the organization’s strengths and weakness.

CIOs should focus on managing the change as outlined in the planning phase, and also consider
communicating this change management plan to their employees. Working with the transition teams
that are formed in the planning phase, and the ongoing cross-departmental teams to implement change
management, is imperative. Involving employees in the change management process builds their
confidence as they see projects succeed. This involvement and collaboration creates enthusiasm for the
integration and the new culture.
42
Maria, Alaranta. Evaluating Success in Post-Merger IS Integration: A Case Study. Page 1
43
Robin, Christianson. After The Merger: Negotiating IT Integration. Page 1
Page 23
The key activities within this process are to:

 Align internal and external communication.
 Implement a phased long-term engagement program.
 Communicate a clear implementation timeline.
Advice from the Pros: Implement Org Change Management Plan44
Key Advice: Understand Impact of Change

One of the key findings of the survey indicates that the CIOs and IT executives wish that they had a
complete understanding of the impact that a change has early in the process to avoid any larger
mistakes. They also believe that change management is crucial to M&A success.
One survey respondent who was involved in the acquisition of a $2 billion electronics firm of 3,000
employees shared the following advice later:
“<removed for external readers>.“
3.4.1.2 Integration: Implement Staff Retention Plans

Implementing staff retention plans helps retain key employees after the completion of M&A
transaction.

Job security is a major concern among all employees during an M&A. These concerns, which are
outlined in the retention plan, must be quickly addressed to achieve M&A success. The key process
activities are to:
 Contact key employees to be retained.
 Map employee skills with upcoming project requirements.
 Communicate bonus programs to staff.
 Practice open communication.
To ensure long-term staff loyalty, it is important to build confidence and competence through training,
mentoring, and encouragement. A feeling of contributing and belonging can be achieved through
concise exchange of information. Shared experiences, responsibilities, and success create a sense of
connection through collaboration. Longevity of staff can be achieved when an employee feels as a
member of the team.
Building trust, providing constant feedback and appreciating employees’ work demonstrate
commitment. Indicating such commitment is a good strategy to retain key employees, given that they
often face the fear of separation. Continuous improvement and self-development can help employees
overcome this fear.
Advice from the Pros: Implement Staff Retention Plans45

Many of the CIOs and IT Executives surveyed indicated that the lack of staff retention planning resulted
in poor integration results.
44
Ibid
45
Ibid
Page 24
What Went Wrong: Poor Culture Assessment

3.4.2 Integration: Technology-Centric Processes

One of the most difficult, tedious, and costly tasks in the M&A life cycle is integrating the IT technologies
of the combining companies. Integrating and consolidating IT infrastructure and systems reduces M&A
costs. Neil Ellerbrook, CEO of Evansville, Indiana-based Vectren Corp., mentioned including IT was
essential to sealing the deal between Indiana Energy Inc. and SIGCORP Inc46. He also shared the
following:
In order to best achieve the specific M&A synergies, plans are established to reorganize IT in the
Planning phase.
3.4.2.1 Integration: Integrate IT Infrastructure and Systems

Often, there are differences and conflicts between companies that are integrating their different IT
systems. Every company has its own IT system that it uses to run various operations, and it becomes
difficult to integrate different systems while ensuring smooth operations.

Important process activities include to47:
 Decide the extent of scaling across IT equipment.
 Review and re-use purchased assets to meet the scaling requirements.
 Dispose of unused components.
 Modify existing applications to support the new business model.
 Perform application-to-application integration.
It is important for the CIO to contemplate the following key considerations 48:
 The evaluation of any contractual constraints on IT equipment, which will help the CIO decide
between sourcing new components or disposing them.
 The key to implementation is a consistent set of tools and processes to measure performance that
can act as a communication and training vehicle for developing project skills.
 Ensure IT and ERP infrastructures comply with the retained operations.
 Practice or "dry" runs of the implementation must be conducted on a sample of customers if the
risks of IT integration are high.
 Though their value may be questionable in light of the overall M&A, implement a good share of
"easy" projects early in the process, as they typically represent the lowest-risk projects and offer a
high likelihood of success. The success of these kinds of projects help in building confidence across
the employee base and establish the communications and overall working foundation necessary to
execute more complex integration projects. Easy projects cited by others involve the following types
of IT infrastructure projects:
o Telephone networks
46
Robin, Christianson. After The Merger: Negotiating IT Integration. Page 3
47
48
Ibid
Page 25
o Data networks
o Telephone equipment
o Email systems
o Document systems
o Videoconferencing
o Hardware/software infrastructure sizing
o Supplier contract renegotiation
o Help desk support
A complete IT integration process is achieved by adhering to the IT system integration plan created in
the planning phase.
Advice from the Pros: Integrate IT Infrastructure and Systems49

Research indicates that it is better to retain infrastructure from the target company if it is better located
geographically, that is better in terms of infrastructure, professional support, weather conditions,
geographical development, and so on, than to unilaterally decide to consolidate all infrastructure in the
acquiring organization’s facilities.
Key Advice: Focus on Foundational Aspects

Systems Integration is a process identified in an earlier phase. However, my team was convinced that
it would be easy to exit and bring the new company’s IT and business systems into their existing
facilities. This process was not easy and later they ran redundant systems.
It is important to obtain all the details and standards surrounding networking components, databases,
applications, and the other technologies of both those existing and those to be acquired.
“<removed for external readers>.“
By making use of the Responsibility Assignment (RACI) matrix, clarity of roles and responsibilities can
be achieved in cross-departmental projects and processes.
3.4.2.2 Integration: Perform Data Migration

Research indicates that more than 80 percent of data migration projects fail due to overruns, 64 percent
are delivered late, and 37 percent run over budget50. In hindsight, inefficient or poorly executed data
migration projects can easily exacerbate already complex M&A transactions and lead to more than their
share of M&A failures.
49
Ibid
50
Howard, Philip, and Potter, Carl. Data Migration in the Global 2000.
Page 26
Table 5. Integration Phase Processes, Key Considerations, Inputs, and Outputs

Data migration involves transfer and consolidation of data onto one enterprise platform. Research
indicates that in M&A situations, data and data sources are too frequently ignored. However, it is
usually crucial to accretive operations to sooner rather than later consolidate or migrate data from one
system to another, and thereby consolidate business applications. The key process activities in this area
include to:
 Profile and map data.
 Extract, transform, and load data into consolidated enterprise systems.
 Create a data dictionary.
The CIO must pay special attention to information flow, and determine the best practices through which
data migration can be achieved. The acquirer should capture the resolution of predefined conversion
rules when each data element is reviewed. This review requires a team of domain knowledge experts.
Each data element must correspond to the data elements in the systems that are being disposed51.
Additional key considerations that a CIO must emphasize are to:
 Focus on data issues from the start.
 Ensure the data integration and data quality tools and skills are readily available to solve the various
data issues that arise during an M&A.
51
Ibid
Page 27
 Standardize legacy data formats and record retention schedules prior to any audit.
Often, teams make false assumptions about the data. The CIO must give special consideration and plan
to overcome the following assumptions52, reflected earlier in Table 5:
Table 6: Assumptions the CIO should consider
Assumption Ground reality

All data is available Required data is missing
Good data quality (valid data) Poor data quality
Data is available in specified formats Unknown or multiple data formats
Documented system interfaces Undocumented system interfaces
Necessary data is in few systems Key data scattered across many sourced systems
Advice from the Pros: Perform Data Migration53
Key Advice: Preserve All Data

The preservation and accessibility of data is essential. CIOs and IT executives agree that it is beneficial
from an IT perspective to understand the people, technology, contracts in place, as well as the risks,
data centers and the data itself before participating in an M&A transaction.
3.4.3 Integration: General/Composite Processes
3.4.3.1 Integration: Integrate Administrative Functions

Integrating administrative functions involves selecting and consolidating basic functions.

The key process activities in this area include to:
 Incorporate organization-wide policies and procedures.
 Consolidate organizational process assets.
This phase involves functions such as financial reporting and human resources. We recommend
completing this phase during the first 100 days of the M&A. Activities such as setting up email systems,
directory services, and helping desk services need to be a priority. In order to achieve administrative
function integration, the CIO must consult organizational policies and procedures documentation.
Advice from the Pros: Integrate Administrative Functions54
What Went Wrong: Loss of Focus
52
Informatica Solutions. Mergers and Acquisitions web page
53
Ibid
54
Ibid
Page 28
One of the survey responses stating what went wrong as the following:
Key Advice: Integrate Systems on Day 1

One survey respondent, an executive consultant to the CIO, believes that systems integration should
happen on Day 1 in order to focus on the real challenges such us people and organizational issues
related to integrating culture and retaining the investment.
Table 7 later summarizes the processes within IT Integration phase (Phase 4) along with key
3.5 Phase V: Readiness & Adoption

After completing the IT integration phase under Day 1, the Readiness & Adoption phase must be
performed. This phase includes activities from Separation to Integration. The processes included in the
Readiness & Adoption phase are: Manage IT Organization Change and Conduct Employee Training and
Readiness.
3.5.1 Readiness & Adoption: People –Centric Processes

In order for the CIO to be prepared for the Readiness and Adoption phase, the CIO has to be aware of
how to manage the IT Organizational Change. According to a study performed by Towers Watson, the
top five challenges identified when managing IT Organizational Change are: aligning the different
cultures, communicating and managing change with employees, retaining key talent, maintaining
employee engagement and productivity, and integrating compensation and benefit programs55. In
addition to these identified challenges, evaluating employee readiness and conducting training are
critical processes for the success of the M&A. Research shows that the employees that leave after an
M&A typically are not the underperformers but the best employees56. According to a study of failed
M&As, management attrition rates increased by 47 percent over the three years following the
acquisition, employee satisfaction decreased by 14 percent, and productivity dropped by 50 percent 57.
3.5.1.1 Readiness & Adoption: Manage IT Organizational Change

Change Management is a critical process to ensure the effective continuity of business operations. In
managing IT organizational change, the CIO can ensure that top employees are retained through
continuous communication during the integration process. Furthermore, while maintaining an open line
of communication, employees are engaged in their operations and productivity is not sacrificed.

The key process activities in this area include to:
 Manage staff time and prioritize between daily administrative tasks and new tasks.
55
Tougas, Kissack, Lynch et al. Mastering the People Risks in M&A, Page 3
56
SAP White Paper: Madness? Mergers, Acquisitions and Divestitures, Page 9
57
Merger & Acquisition Integration Excellence: Executive Summary (Best Practices LLC online database
www3.best-in-class.com/bestp/domrep.nsf/content/2660176d3c73c34485256ddA0056B49c!opendocument,
2000)
Page 29
 Facilitate collaboration and communication between personnel and management.

Keeping a schedule of one-to-one meetings between key employees and managers can help employees
organize their time and prioritize their tasks. Communication is a key component to monitor the comfort
and confidence level of employees during periods of stability, doubt, hope, and capability.
During the stability phase (before the deal is announced), employees experience feelings of clarity,
security and comfort. Once the deal is announced, employees enter the doubt phase; where they
encounter feelings of confusion and fear of the unknown.
Harry Levinson, a management psychologist and Harvard Professor Emeritus, mentions that the goal of
an M&A is to improve the current company's situation. However, he explains that the transition can
affect relationships, norms, and work behavior, and it can throw support systems out of balance. It is
important to address these human or psychological challenges early on to avoid chronic problems in
attitude and behavior58.
After the doubt phase, employees enter the hope phase. In this phase the employees’ comfort and
confidence levels increase significantly due to training. Employees experience feelings of clarity,
direction, and skill development.
At the last stage of change, capability, the prevailing feelings within employees are contentment,
satisfaction increased capability and a new stability level.
Table 7. Readiness & Adoption Phase Processes, Key Considerations, Inputs, and Outputs
58
Senn Delaney, Culture clash in mergers and acquisitions, Pages 3–4.
Page 30
Figure 3. Stages of Change
Advice from the Pros: Manage IT Organizational Change59
Key Advice: Perform Effective Change Management

Several CIOs and IT executives surveyed believed that far more time needs to be spent on developing
the new organizational model. They also added that there should be an analysis conducted to
understand how the combined entity will function as a profitable business. One CIO advised to keep
central the Change Management aspect of the transaction. He thought it would be helpful to recruit a
professional services organization to coordinate change and help the merging company better
navigate its overall impact.
Another key is to think about how to connect the two companies seamlessly so that the new
employees not only connect with the current employees but also can stay connected with their
current peers and professional networks. This creates a unified company.
3.5.1.2 Readiness & Adoption: Conduct Employee Training and Readiness

Conducting employee training is a key process to develop new employee skills and to increase employee
capability and confidence. The training projects will emerge in the integration planning phase.

The key process activities include to:
 Train for administrative functions.
 Train for new specific applications (for example, a new ERP system).
59
Ibid
Page 31
Training on continuing administrative functions is crucial to avoid daily operational disruption. Training
on new specific applications is also an important requirement during integration. Our research found
that most M&A events fail to realize the expected synergies due to integration difficulties, and that ERP
is a large component of the integration effort60. Therefore, ERP training needs to be planned in
advanced and provided to new and current employees.
The stages of change in which training plays a significant role are hope and capability. While training is
performed, involvement of members of the due diligence team can help with continuous motivation and
elimination of fear.
Advice from the Pros: Conduct Employee Training & Readiness61

Training should be planned for and conducted appropriately to avoid mistakes.
What Went Wrong: Poor Training

The following CIO experience extracted from our primary research shows how training that was not
appropriately planned violated several Neat and Clean room restrictions:
Key Advice: Cross-Train Teams

A key piece of advice mentioned repeatedly during our survey was to cross train systems engineering
teams by combining resources of different teams. For example, cross training engineering teams on
UNIX, Linux, and Windows equally helps the entire organization support its newfound mix of
technologies and related business applications.
Table 7 earlier summarizes the processes within the Readiness & Adoption phase (Phase 5) along with
key considerations, inputs, and outputs.
3.6 Phase VI: Post-Integration Review

3.6.1 Post-Integration: Process-Centric Processes
After integration is complete, conduct a post-integration review to realize synergies and the value of the
M&A. The reviews conducted in this stage include a comparison of accomplishments against
expectations, as well as an assessment of lessons learned through gathering information from key
players.
3.6.1.1 Post-Integration: Assessment of M&A Value

The two key activities in this area are to:
 Compare actual M&A outcomes with intended / planned outcomes.
 Evaluate post-merger shareholder value through analysis of the following six factors:
60
Phelan and Montgomery, ERP Program Manager's Guide to Mergers, Acquisitions and Divestitures (Stage 6:
Operational Review) Page 1
61
Ibid
Page 32
o How synergy was measured and evaluated.

o How integration project planning was conducted.
o How the due diligence process was executed.
o How the management team was selected and staffed.
o How and to what extent cultural issues were resolved, if at all.
o How the communication plan was developed and more importantly how it was executed.
According to an M&A study performed by KPMG, “Only by gaining a clear understanding of what and
where value can be obtained from a deal, can companies hope to avoid ‘bad’ deals and be in a position
to work out how, during integration planning, this value extraction will be achieved 62.” In addition to
this, based on the survey conducted in this KPMG study, the six components outlined earlier have the
most impact on unlocking value from an M&A deal. One of the most common mistakes during an M&A
deal is to concentrate on budget and timeline. However, CIOs must realize that people are the ones
implementing the deal and ultimately creating the value. The survey results showed that by combining
the six factors earlier and making them priorities, a greater shareholder value can be realized from the
deal.
Advice from the Pros: Assessment M&A Value63
Key Advice: Evaluate All Business Areas

In a key piece of advice, Gary Bronson touches on several of the factors necessary to create value:
3.6.2 Post-Integration: General/Composite Processes
3.6.2.1 Post-Integration: Conduct Post-Mortem and Identify Lessons Learned

A Post-Integration review presents an opportunity to identify issues and areas for improvement through
the collection of post-integration information. The acceptance of this information and the support and
commitment of the CIO and IT executives can help execute contingency plans from lessons learned in
future transactions.

The key process activities under post-mortem review and lessons learned include to:
 Identify M&A mistakes and create contingency plans for future transactions.
 Analyze whether expectations were met in each stage of the process (from pre-plan to post-
integration review).
 Determine whether goals were accomplished during the specified timeframe.
Advice from the Pros: Conduct Post-Mortem & Identify Lessons Learned64
What Went Wrong: Resistance to Change
62
KPMG, Unlocking Shareholder Value: The Key to Success, Page 11
63
Ibid
64
Ibid
Page 33
What Was Missed: Detailed Integration and Execution Plans

Table 7 earlier summarizes the processes within the Post-Integration Review phase (Phase 6) along with
key considerations, inputs, and outputs.
Page 34
4 Current Trends in M&A

New trends and innovations in computer technology are likely to affect the way IT integration is
conducted in the future. “Cloud computing,” for instance, is creating a huge shift in computing
technology and more businesses are moving to the cloud to house applications, data, and computing
resources as industry sectors converge. The cloud phenomenon and the desire by technology companies
to maximize markets are key drivers behind important industry changes. Intel’s acquisition of McAfee,
and Oracle’s purchase of Sun Microsystems are a couple of well-known examples of industry sectors
converging over the past couple of years that provide end-to-end consumer solutions. It is currently
unknown how cloud computing will affect data migration and systems integration during M&As in the
future.
As the economy cyclically starts and stops, certain trends regarding M&A activities have started to
emerge. The trends include: convergence of industry sectors, movement toward cloud computing and
virtualization, increase in the Internet industry, and diversification in IT services. The convergence of
industry sectors is expected to continue, and the goal is to be able to reach more consumers through
technological advances. For instance, virtualization is driving software innovation; social networking
sites have created a new platform to attract more consumers; access to healthcare has expanded as
financial and healthcare industries move to IT platforms; and consumer electronics are focusing more on
mobility. The number of technology deals in the U.S. completed in the past couple of years has
increased, thanks to sector convergence and constant innovations. In addition, cross-border acquisitions
experienced a 78 percent increase in 2010 due to activity increase in Europe and Asia 65. And cross-
border transactions likely increased in 2011 as the global economy stabilizes and businesses seek to
expand their market share beyond borders.
The impact of the cloud has been most evident in the software sector. Software as a service (SaaS)
models have become very attractive to providers and consumers. Virtualization is also driving innovation
of software tools designed for management and security in an increasingly vague IT environment. Large
players were continuing to move into cloud computing through 2011, and to develop more software
specialization in the form of services focused on SaaS, platform as a service (PaaS), data as a service
(DaaS), and infrastructure as a service (IaaS) offerings are more focused on virtualization technologies.
The Internet industry also experienced an increase in M&As, as large players like Google, Symantec
Corp., and Visa Inc. increased the number of deals since 2010. E-commerce has taken the lead on
Internet activity as Internet-based companies discover ways to further monetize existing relationships.
Security systems and the entertainment and media industries continue to grow in importance and
popularity, which has created more demand for Internet deals. Mobile Internet and social networking
continue to proliferate as well.
On the other hand, semiconductor companies for example have not jumped into M&A activity as
anticipated. However, with the buildup of excess cash over the past few years in this sector, and with
interest rates still at very low levels, some of the large players will continue to invest in strategic
acquisitions at the mid-market level.
IT services has taken a different focus, diversification. The trend of high-volume middle-market
transactions is expected to continue as companies seek to strengthen their products and services in a
more competitive environment. IT service companies look to better serve their existing consumer base
65
PWC, Technology sectors converge. Deal activity rebounds. 2011 US technology M&A insights. March 2011.
Print.
Page 35
while adding services in new areas. The challenge in diversifying through M&A activity is to identify their
focus, and the potential gaps to fill in their portfolio of offerings.
Finally, M&A activity in the hardware and networking industry has prevailed and served to presumably
strengthen the industry’s product lines. The major players in this space have added more dynamic data
storage offerings, software solutions, and service offerings. Clearly, M&A activity can be effectively take
advantage of to create synergies and greater value; the key is to follow a framework similar to the one
described in this document and ensure that nothing critical is overlooked.
Page 36
5 Summary
Many CIOs and other IT executives shared their experiences related to M&A transactions during the
research for this document, and we are grateful for their insights. They identified what went wrong, and
what was missed during the evaluation, planning, and integration processes of M&A activity. They also
provided key advice for other CIOs who are likely to one day find themselves involved in an M&A
transaction. In response to this information, and in conjunction with the review of the secondary
literature, the Eller College of Management graduate school team at the University of Arizona under the
guidance of Microsoft found it possible to develop something unique and differentiating: an M&A
framework that provides insight into these types of transactions.
This M&A Framework, coupled with insights gleaned from CIOs and other high-level IT executives
experienced in M&A, provides an objective approach for CIOs to better prepare and execute integration
during an M&A. The six phases identified in this paper: Pre-Planning, Due Diligence, Planning, IT
Integration, Readiness& Adoption, and Post-Integration Review, along with their respective underlying
processes, provide a comprehensive road map that a CIO can use to proactively identify problems and
challenges. By improving planning, prioritizing key projects, and identifying the key skills and resources
explained in this document that are required for a successful integration of systems and organizational
culture, CIOs can better prepare to effectively navigate an M&A project, achieve its desired synergies,
and ultimately meet the goals of the newly formed business organization.
Common Pitfalls in an M&A

Common pitfalls identified by the surveyed CIOs and IT executives include:
 Failure to involve the CIO early enough in M&A planning and execution.
 Inadequately addressing individual and organizational resistance to change.
 Poor or incomplete due diligence efforts.
 Failure to plan for staff retention.
 Failure to proactively mitigate culture clash within the IT organization and related organizations.
 Not conducting or ignoring the risk assessment.
 Not conducting IT training both before and after systems integration.
Keys to Success in an M&A

The keys to success identified by the surveyed CIOs and IT executives include to:
 Quickly connect the CIO to the broader executive team to provide full understanding of the
desired outcomes of the M&A.
 Understand the role of organizational culture during integration.
 Set a realistic timetable for integration.
 Communicate key decisions with all IT staff and encourage open communication throughout the
M&A process.
 Plan out integration well in advance.
 Focus on foundational aspects of the business and how IT supports those aspects.
 Understand and preserve all data.
 Identify and document lessons learned.
Page 37
5.1 Appendix A: Works Cited

“Accelerating M&A Value Capture Tools to Support IT’s Acquisition Assessment, Planning, and
Integration Activities” CIO Executive Board: IT Management Toolkit Series. (2007). Print.
Albayrak, Adam et al. “Managing Mergers and Acquisitions or Post-Merger Cookbook for CIOs and IT
Management”. Proceedings of the European Conference on Information Management &
Evaluation. Print.
Anderson, George et al. “SAP Implementation Unleashed: A Business and Technology Roadmap”. (2009).
Print.
Blatman, Peter et al. “The Role of Information Technology in Mergers and Acquisitions”. Deloitte
Consulting LLP. (2008). Print.
Blatman, Peter; Ramchandran Asish, and DeLua Julianna. “Raising the stakes of information: Effective
information management for mergers, acquisitions and divestitures”. Deloitte Consulting LLT.
(2008). Print.
“CA Service Management Process Maps” CA. (2009). Image.
Christianson, Robbin. “After the Merger: Negotiating IT Integration.” Public Utilities Fortnightly, IT
Supplement. (2000). Print.
Cullen, Alex. “Mastering M&A: The CIO’s Game Plan.” (2006). Print.
Felix, Susan. “Taming the Hidden Costs of Post-Merger Integration to Achieve Financial Objectives for
Management and Shareholders”. The Mergers & Acquisition Advisor. (2002). Print.
“Five Keys to Post-Merger Success for CIOs | Thoughts on a Little Bit of Everything.” Thoughts on a Little
Bit of Everything | Hop’s Thoughts…. Web. 12 Oct. 2011.
<http://marchoppers.com/blog/2011/07/04/five-keys-to-post-merger-success-for-cios/>.
“Global M&A Outlook for Retail”. KPMG International. (2009). Print.
Hoffman, Rene et al. “Managing risk in the M&A box: Broaden your approach or keep it contained?”
Deloitte Debate. (2009). Print.
“How Cisco IT Standardizes the Acquisition Integration Process” Cisco Public Information (2007). Print.
Howard, Philip and Potter, Carl. “Data Migration in the Global 2000”. Bloor Research. Sep 2007. Print.
IBM. “Accelerating merger and acquisition success: Integrating organizations through content”. (2005)
IBM WebSphere Information Integrator Content Edition. Print.
IBM. “IBM WebSphere Application Server Family: Flexible infrastructure for today’s business world.”
IBM. (2007). Print.
Lajoux, Alexandra Reed, and Charles Elson. The Art of M&A: Due Diligence. The McGraw-Hill Companies,
Inc. 2011. Print.
Lugo, Denise. “IT Systems a Key In Retail Mergers.” Investment Dealer’s Research. (2005): 11-13. Print.
Kelly, John et al. “Unlocking Shareholder Value: The Keys to Success”. KPMG. (1999). Print.
“Madness? Mergers. Acquisitions, and Divestitures.” SAP White Paper. (2008). Print.
“Managing Risk in the M&A Box”. Deloitte. (2009). Print.
“Mastering the People Risks in M&A: The Heart of a Deal”. Towers Watson. (2010). Print.
Page 38
McMahon, Seamus; Bodziak, Andrew and Dixon, Brodie. “New Integration Rules The Path to Successful
Bank Mergers”. Booz & Company. (2008). Print.
“Mergers and Acquisitions in the Healthcare Industry”. AT Kearney. (2010). Print.
“Merger and Acquisition Success: An Implementation Guide”. McCreight & Company: Strategy
Implementation Consultants. (2006). Print.
Mitchell, Robert. “CIO Discusses IT Methods for Mergers”. (May 23, 2005). www.computerworld.com.
Neil, Stephanie. “The Science of Merging”. PC Week. (1998). Print.
“Post-Merger Champions: Peer advice from the CIO Executive Council” www.cio.com. Dec. 1, 2010. 42-
44. Print.
Paulson, Ed. Inside Cisco: the Real Story of Sustained M&A Growth. New York: J. Wiley & Sons. (2001).
Print.
Pratt, Mary K. “Get Into the M&A Game”. (2011). Computer World. Print.
Reese, Andrew. “Best Practices for M&A”. Supply & Demand Chain Executive. (2007). Print.
Senn, Larry. “Cultural Clash in Mergers and Acquisitions”. Print.
Sarrazin, Hugo and West, Andrew. “Understanding the Strategic Value of IT in M&A”. McKinsey
Quarterly. (2010). Print.
Smith, Gordon. “Warning: M&A Needs More IT Security.” Journal of Corporate Accounting and Finance.
(2005). Print.
Sguazzin, Marco et al. “The M&A Value Equation”. Deloitte Consulting LLT. (2009). Print.
“Technology sectors converge. Deal activity rebounds. 2011 US technology M&A insights”. PWC. March
2011. Print.
“The M&A Value Equation: Harnessing the full results from your strategy doesn’t start or end with Day
One.” Deloitte. (2009). Print.
“Trends, Challenges, And Technology Use In A Changing M&A Environment”. Forrester Research. (2010).
Print.
Watanabe, Chihiro et al. “Learning and assimilation vs. M&A and innovation: Japan at the crossroads”
Technology in Society 31 (2009). 218-231. Print.
“Welding Different Companies into a Business Powerhouse” Microsoft Dynamics. (2008). Print.
5.2 Appendix B: Survey Results Reports

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5.3 Appendix C: Due Diligence Checklist

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Contributors, reviewers, and mentors:

4 CURRENT TRENDS IN M&A ............................................................................................................................. 35

2 Value of Mergers & Acquisitions

3 The Microsoft Mergers & Acquisitions Framework v1.0

Figure 1. M&A Framework v1.0

3.1 Phase I: Pre-Planning

3.1.1 Pre-Planning: General/Composite Processes

3.1.1.1 Pre-Planning: IT Alignment with Corporate Strategy

Process Activities and Key Considerations

The key process activities are:

Table 1. Approach to Match Reasons for Acquisitions

Advice from the Pros: IT Alignment with Corporate Strategy6

What Went Wrong: Poor Leadership

What Was Missed: Business Changes

Key Advice: Strong Leadership

“<removed for external readers>.”

3.1.1.2 Pre-Planning: Identify Budget

Process Activities and Key Considerations

Advice from the Pros: Identify Budget8

Key Advice: Budget Slack

3.1.1.3 Pre-Planning: Evaluate Legal and Compliance Risks

Process Activities and Key Considerations

Advice from the Pros: Evaluate Legal & Compliance Risks9

What Went Wrong: Poor Legal Evaluation

Key Advice: Governance Training

3.1.2 Pre-Planning: People –Centric Processes

3.1.2.1 Pre-Planning: Evaluating Organizational Culture

Process Activities and Key Considerations

Advice from the Pros: Evaluating Organizational Culture11

What Was Missed: Poor Evaluation of Culture

“<removed for external readers>.”

Key Advice: Understand Organizational Culture

3.1.2.2 Pre-Planning: Identify Due Diligence Team12

Process Activities and Key Considerations

Advice from the Pros: Identify Due Diligence Team

What Went Wrong: NDAs

Key Advice: Effective Communication

3.1.3 Pre-Planning: Technology-Centric Processes

3.1.3.1 Pre-Planning: Evaluate IT Technical Capabilities

Process Activities and Key Considerations

Advice from the Pros: Evaluate IT Technical Capabilities13

Key Advice: Set Realistic Goals

3.2 Phase II: Due Diligence

3.2.1 Due Diligence: Assess Target of Acquisition14

Process Activities and Key Considerations

Advice from the Pros: Assess Target of Acquisition16

What Went Wrong: Ineffective Due Diligence

“<removed for external readers>.”

What Was Missed: Small Details

Key Advice: Focus on Foundational Aspects

3.3 Phase III: Integration Planning

3.3.1 Planning: People–Centric Processes

3.3.1.1 Planning: Create Integration Management Team and IT PMO

Process Activities and Key Considerations

 Develop decision-making criteria to help make effective decisions quickly.

What Went Wrong: Slow Decision-Making

What Was Missed: Communication

Key Advice: Make Quick Decisions

3.3.1.2 Planning: Develop Organizational Change Management Plan

Process Activities & Key Considerations

 Rewards. Establish a rewards system.