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CIO Tip Sheet: Surviving an M&A

Forrester Research offers four tips for working through the critical phases of mergers and acquisitions.

A recent report from Cambridge, Mass.-based Forrester Research Inc. offers timely advice for CIOs on how to make a game plan for a merger and acquisition (M&A). Why timely? Merger mania rolls on.

Merger and acquisition activity totaled a record $2.7 trillion worldwide in 2005, including $1.3 trillion in the U.S., according to Thomson Financial and the Association for Corporate Growth. Dealmakers are already salivating over prospects for 2006, as the climate for M&A activity warms up.

Good for shareholders, perhaps. Excellent for investment bankers, for sure. But for CIOs, mergers and acquisitions mean rough weather ahead, according to Forrester analyst Alex Cullen, author of "Mastering M&A: The CIO's Game Plan." CIOs need to start planning an integration strategy as soon as they have knowledge of the deal, with a goal of being "90% confident about the IT plans by the date of the deal's close," he said.

Once the deal is closed, successful CIOs will make integration their top priority, Cullen said. "This is the obvious point that people most often overlook."

Here are some of Forrester's suggestions for mastering the M&A:

More M&A help

The compliance factor

Making it through the M&A minefields

Be brutally honest about jobs. CIOs need to quickly and clearly state how staffing decisions will be made. Identify which positions and staff members to keep and ways to retain them. Adopt a retention bonus program closely tied to the integration plan, with bonus kickers for meeting milestones and savings goals.

Move quickly to get the low-hanging "savings" fruit. That means consolidating data centers and renegotiating software licenses and vendor contracts to prepare for a larger user base.

Drive business decisions away from feature-by-feature comparisons. Application rationalization is critical because the cost of redundancy is so high and because business process integration requires a single applications set. This is the lengthiest and most complex part of integration. The big insight? CIOs must help executives see that "the shortest path to synergies may be to use as little as possible from the acquired firm."

Pick one firm's set of processes. Roll those out to the other firm's staff. Process consistency is the hallmark of a mature IT organization. It's also an important element in how business perceives IT. Processes such as procurement and security policies must be stabilized and standardized. Merging two firms' processes during an M&A integration adds to staff confusion. Forrester recommends you don't do it.

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