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Identify the best technology fit in M&A

Source | | RAMKUMAR

Why ‘technology fit’ is important?

In a M&A deal, many of the risks are identified during the due diligence. These risks extend from cultural mismatch to financial risks. One critical area where due diligence is required is in assessing the technology fit of the two entities.

M&A is done to pursue organizational growth, customer acquisition or economies of scale. The heart of all these strategies lies in the successful integration of enterprise data systems across the two organizations. When technology fit is given less priority, it can create costly and time consuming challenges. These challenges can hinder the new formed entity in reaching its investment return.

To achieve M&A success, the IT leadership needs to be involved earlier in the M&A journey.

Technology Due Diligence

Due Diligence is a vital phase in the M&A lifecycle. Due Diligence is more focused on securing critical elements of finance, equity and support. Hence enough time is not allocated to assess the fit of enterprise technology systems of two entities.

During the Due Diligence, the target entity shares a great deal of business critical information with the acquirer. It is critical to involve technology in discussions from an early stage. This would benefit the business at a longer run.

Mapping the new enterprise architecture

When the technology leadership is involved earlier, there is a greater likelihood of maintaining ‘business as usual’ immediately post acquisition. The IT leadership support in minimizing systems downtime and ensuring customer service continuity. The business team can dedicate more time towards customers, employees and investors.

Technology teams start planning during the early stages of due diligence process to cover an audit of both company’s systems. This is done to understand the assets, demands and skills available in each entity. The audit also needs to identify functions where the resources are duplicated. If the integration strategy is to combine the two businesses fully, then the next step should be to create an enterprise infrastructure map for the newly formed organization. The target end planning would require sharing customer databases, leveraging economies of scale and integrating CRM systems of the two entities.

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