Merger, acquisition, and divestiture events require significant IT planning to ensure that the business value of the deal in progress can be realized. Wavestone has helped clients tackle difficult strategic IT challenges at all stages of the M&A process lifecycle. In line with our philosophy of business-driven IT, we design the best-fit approach for each client’s specific deal thesis and business plan. Our primary focus is on maximizing speed to value and capturing synergies to deliver deal value while minimizing risk and business disruption.
We believe that targeted IT strategy initiatives are critical in several typical M&A scenarios:
- Acquisition Due Diligence
- M&A Integration Planning
- Carve-Out and Divestiture Planning
- Synergy Capture
Having the same partner from the due diligence stage through to the post-merger integration reduces risks and creates new opportunities for value creation. Added benefits include speed to value, enhanced efficiency, and lower costs.
Understanding a target organization’s IT capability is more important than ever in any acquisition due diligence process. IT has always been critical to ensuring that business operations run smoothly through the course of a transition. Enterprise resource planning (ERP), human capital management (HCM), and supply chain management (SCM) systems have been at the heart of key business processes for many years. However, companies today have expanded their dependencies on web and e-commerce, data and analytics, and business process automation to the point that these technologies may now be at the core of their value proposition and business differentiation. Understanding whether a target entity’s proprietary IT is real and can live up to its promise is essential.
Wavestone has assisted numerous private equity, and strategic buyers evaluate the technology and IT processes of potential acquisition targets. Our experienced consultants are comfortable working at an intense pace and operating as part of a broader due diligence team, often collaborating with other organizations in developing more holistic assessments.
While Wavestone strongly encourages companies to include the IT organization very early in merger integration planning, we have found that this is rarely the case. IT typically gets involved in these processes only after the acquisition and merger decisions have been made, deals have been announced, and the aggressive integration clock has started ticking.
Wavestone helps clients in these situations quickly assess the technology systems and processes of all the parties undergoing integration. We also address prior acquisitions that may not have been fully consolidated. Our approach is to normalize and compare each company’s current IT function across six primary dimensions – Organization, Process, Infrastructure, Applications, Suppliers, and Financials. With this baseline assessment in hand, Wavestone factors in the company’s business strategy to determine which elements of IT need to be standard across the integrated company and which parts should be unique to a particular business unit. We then identify redundancies and make recommendations regarding rationalization and consolidation across those dimensions.
Key Elements of the M&A Playbook
Wavestone underpins all its recommendations with a financial model and business case to determine both the investment required to integrate and the cost synergies achievable in the process. We then help you develop a formal, detailed, and executable integration plan inclusive of a program timeline, resource plan, financial requirements, risk mitigation plan, and communications strategy. Where required, we support our clients with program management and the execution of the integration efforts.
Carve-out and Divestiture Planning
Wavestone also helps clients plan spinoffs and divestitures from an IT point of view. In these scenarios, our consultants take a two-pronged approach.
Early in the process, we help to identify and market existing IT capabilities that enhance the value of the deal. These may include customer engagement systems, process automation or key data repositories and analytical systems.
Further along in the process, our consultants will plan an orderly separation of the carved-off unit’s IT function from the parent. These separations may include data segregation, systems cloning (application and infrastructure), organizational division, and asset allocation (hardware & software). IT separation also typically involves the creation of a Transition Services Agreement (TSA) to enable a swifter resolution by allowing the parent to perform services for the new organization under a third-party contract.
Wavestone has also worked directly for spinoff entities to define a new target IT operating model. We can set up a tailored IT function after helping to resolve legacy IT issues imposed by its former parent.
Even the most carefully developed value creation strategies and synergy models don’t guarantee value delivery. Wavestone will meticulously identify, manage, and execute on synergy opportunities from due diligence through to the integration of the newly combined entity. Continuous tracking of synergy progress will help to keep the focus on the right activities at the right time including application rationalization, infrastructure consolidation, security parity, and cost synergy realization.