By Greg Schlimm, M&A Research Faculty, Transaction Advisors Institute Engaging the deal team early, often and with a commercially focused mindset can improve integration outcomes while increasing your strategic influence.
Deal teams comprised of senior business leadership and strategy professionals are rarely IT experts. Most pre-deal discussions are about market opportunity, capturing additional share of customer wallet, expanding product lines and upskilling teams, with nary a mention of technology specifics. More often than many would like to admit, IT teams are brought into pending deals late, asked to plan and quote with imperfect information and told to integrate complex technical environments with little say in the how, why or when.
Companies learn quickly after the deal that talking about creating value is much easier than delivering it, especially when one of the critical value delivery components is responsible, competent integration and alignment of IT systems. But the historical pattern is that the commercial leaders and M&A teams do the deal, organize a handoff and move on to other priorities, leaving the IT and engineering teams responsible for making it work and creating the intended value. Many IT professionals have lived through poorly planned and under-resourced integrations with teams stitching together systems and platforms as best they can, resulting in technical debt-ridden Frankenstein environments that haunt the business long after the deal is done.
This has started to change a bit with the shift in strategic perspective on M&A that has taken place over the past 10 years. The data is clear that firms that do M&A grow more than firms that don’t: even with a 2023 decline in deal size and volume, it remains a proven and resilient strategy for increasing shareholder value.1 IT is now likely to be more involved than before and invited to the table with a key role to play—some might argue one of the most important roles, given that:
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M&A is becoming a vital core competency. Most firms have both organic and inorganic growth plans, and both are needed to hit the company growth targets. Moreover, programmatic acquirers—those who approach M&A as “a capability, not an event” and generally pursue multiple small deals—consistently see higher returns than their peers.2
1Amiya Setu and Heith Rothman, “Why some acquirers are seeing a big boost in shareholder returns,” EY.com, September 2023.
2Jake Henry and Mieke Van Oostende, “Top M&A trends in 2024: Blueprint for success in the next wave of deals,” McKinsey.com, February 2024.
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Every acquisition is a technology acquisition. Today, virtually all M&A and divestiture deals are tech deals in one way or another. Newer tech companies acquire technology to expand and stay relevant in their core markets. Legacy firms buy or shed technology to transition their business models. Even non-tech firms operate with complex technology platforms: every company has a CRM, a payroll platform, logistics technology and dozens of other systems. This has made IT involvement and expertise a de facto requirement of a strong M&A competency.
However, these factors don’t mean that M&A is easy and smooth—or that IT leaders and their teams don’t continue to experience integration challenges that could have been predicted, mitigated or avoided altogether. To truly influence better M&A outcomes and lead their organizations to success, IT leaders must challenge themselves to bridge the gap between the commercial potential that justifies the execution of a deal and the reality of delivering that value.
The technologists that help close this gap using the language of business, aligning technology with strategic goals, and embracing their role as key drivers of value in every phase of the deal will transform themselves and their teams from the managers of IT platforms to the drivers of commercial success using IT.
Every M&A transaction has a deal thesis and must prioritize three critical overarching objectives: maintaining value in the acquired entity; bringing the acquired entity into compliance with existing policies and procedures; and delivering whatever synergies the deal thesis was built on. Historically, IT teams have focused on the first two areas, often treating them as a checklist of tasks: securing data, integrating new capabilities, integrating networks and ensuring system compatibility.
While these are essential, they’re only a part of the broader picture. The real game-changer lies in how well IT can align with and drive the deal thesis—the strategic rationale that justifies the acquisition in the first place. To achieve that alignment, IT leaders must immerse themselves in the deal thesis from the outset. This isn’t just about understanding the basic goals—it’s about getting to the core of the strategic aims that led to the M&A decision. That requires technologists to communicate in the language of business, starting with asking four key questions:
What are the primary goals of this acquisition? Is the aim to gain market share, access new technology, eliminate a competitor or diversify the product portfolio?
What are the commercial expectations? Understand the financial targets, such as expected revenue growth, cost reductions or EBITDA improvements.
What synergies are expected? Find out whether the focus is on top-line growth through new customer acquisition or cross-selling opportunities, or bottom-line improvements through cost synergies like shared services or supply chain optimization.
What is the expected timeline for realizing these synergies?
Exploring the justification and expectations with the deal team is key. Having clear answers to these strategic questions upfront will enable you to envision the technological path forward more accurately and effectively. If the deal thesis hinges on rapid market expansion, IT might prioritize projects that enhance customer acquisition capabilities or accelerate product deployment. If cost synergies are a focus, the emphasis might be on system integration, automation or eliminating redundant technologies. The pace of integration, the priorities of it, and sometimes even whether to do it should be driven by the deal thesis.
Keeping the strategic goals in mind will also empower you to frame technological decisions for the deal team in terms that matter to them. Senior leadership isn’t primarily interested in the technical specifications and merits of a new cloud platform; they want to know whether that platform will enable faster product rollouts, reduce time-to-market or support the company’s growth objectives. Deal-thesis orientation and business-language fluency will help you position IT as a true strategic partner, not just a highly skilled and invested service provider. Show interest in the commercial aims and help deliver them.
Once there is preliminary approval to explore a deal, diligence and planning kick into motion. In this phase, the acquirer learns about the target in much more detail, and the integration team with functional areas plan key milestones and who-will-do-what-when after the deal closes.
In the early stages of the deal justification phase, only high-level information is available, which means pre-deal planning often involves best-guess scenarios. Basing recommendations and decisions on incomplete data sets is anathema to most technologists’ instincts and training. Yet IT leaders must proactively engage and provide input and support to the deal team at this crucial juncture. Teams that hold back, claiming insufficient data, are writing themselves out of an opportunity to shape and influence downstream outcomes.
This requires the adoption of a new mental framework—a shift in thinking from, “Give me all the details and then I’ll assess,” to, “Give me enough information to validate the deal thesis and get ahead of risks.” The following approach can help support this shift:
Prioritize make-or-break areas. Even with incomplete data, some risks and opportunities will be obvious. Focus on these first, leaving aside others until more information is available.
Use scenarios and hypotheses to guide analysis. Construct a range of plausible best-to-worst case scenarios and their potential impacts extrapolating from the data you have.
Collaborate closely with the deal team. Regularly check your assessments against business objectives to make sure they’re aligned and validate your findings with cross-functional peers to keep technological considerations integrated in the assessment.
An effective diligence and planning process should culminate in two key deliverables:
a diligence assessment with a view about how/if the deal thesis can be delivered and,
a documented, transparent integration plan to deliver it.
These deliverables should include clear workstreams, named owners and realistic timelines, and assume adjustments will be made as the deal progresses and more data comes to light. A proactive pragmatic-over-perfect approach will help you ensure this plan balances risk mitigation with strategic alignment.
The integration phase of an M&A deal is where the rubber meets the road. Plans conceived during due diligence and planning are put into action, and the real work of merging two organizations begins. More comprehensive information continually emerges during this phase, so it’s essential to revisit the assumptions and decisions made based on best-guess scenarios or limited data and adjust the integration plan accordingly. This iterative process demands an embrace of adaptability and a commitment to cross-functional collaboration with regular checkpoints to review progress, address issues and keep integration on track.
Here again, IT leaders need to communicate in the language of the audience they are addressing, switching among several different hats as needed to ensure messages are received and understood correctly and that the deal thesis stays front-and-center:
Connect tactics to strategy with leadership: Conversations with commercial leaders should continue to link technology activities to the broader business strategy and commercial goals, with updates that highlight milestones achieved, risks mitigated, and new opportunities and roadblocks surfaced.
Drive execution with technical teams: IT teams need to stay focused on the nuts and bolts of implementation. Discussions with these teams should center on technical challenges and how they’re being addressed in line with the project timeline and support agile practices to manage complexity.
Partner collaboratively with business units: Interactions with other departments are about ensuring that technology considerations are fully integrated into broader operational plans. This might involve co-developing solutions that illustrate and support cross-functional synergies.
This agile, iterative, collaborative approach, keeping strategic objectives front of mind, is a modern M&A best practice and essential to ensuring successful outcomes. If you’re not engaging with business units, senior leadership and your own teams in this manner, it’s time to start.
In many companies, M&A is not a one-time activity. Sometimes there are even multiple deals in play simultaneously. The period after a given integration is completed is invariably a relief for IT leaders, but it’s important to take the time to regroup. Be proud of what went well and take steps to train the next team on what they should emulate; be open about what didn’t go well and collect ideas on how to get ahead of the same issue for next time.
Maintaining ongoing focus on the deal thesis and consistently organizing technical initiatives to align with it is essential. But surprises are inevitable. We all know integration is messy, and stumbles will happen. The key is to manage them with a learning mindset and an eye for opportunity.
Focus learnings on future transactions. Modern M&A best practices recognize that each deal is a chance to strengthen this corporate muscle for the next transaction. To that end, make sure you have mechanisms in place to baseline and monitor IT activities—tracking the achievement of key milestones, delivery of planned synergies and effectiveness of deployed resources—and to report data back to senior leadership. Document the details of both successes and setbacks and build a repository of best practices to guide and improve the process next time.
Grab the chance to evolve your IT estate. Rather than merely adapting to new circumstances, the post-deal environment presents an opportunity to leapfrog your technology, shed or modernize outdated systems and streamline your infrastructure. Plenty of we’ve-always-done-it-this-way projects and processes can be abandoned for more modern architectures, platforms and thinking.
Partner to go further faster. There may be more openness among senior leadership during this period to bringing on partners who can accelerate time to outcomes with highly specific expertise and the resources to augment internal skills or experience gaps, especially when you can demonstrate the commercial benefit and link the partnership to intended deal goals.
Explore and elevate the potential of your team. This is the perfect moment for those who thrive in “messy projects” to step up and drive meaningful change. Such opportunities are rare in a typical business-as-usual environment, so encourage team members who excel in complex projects to take the lead. Their ability to navigate and manage this era of transition will be invaluable.
With an open-minded and solution-focused approach to navigating the new landscape, technology leaders can ease transition difficulties while continuing to prove the strategic value IT contributes to successful M&A.
As M&A continues to be a key growth strategy and as technology becomes increasingly integral to every business function, the role of IT is more critical—and more complex—than ever before. The days of “tossing it over the wall to IT” are behind us, but there still are plenty of challenges that need addressing. The expanded role of technology in both the strategic benefit and the operational reality of targets is a real opportunity for those that grab the ring. IT leaders are uniquely positioned to be the change agents that drive capturing deal potential.
By developing an insatiable curiosity about the motivators behind major transactions, learning to couch technical initiatives in commercial terms, and seeing the full potential for their abilities to support the business, IT leaders will not only ensure more seamless, stress-free technical integrations. They will also position themselves as invaluable strategic partners, helping their organizations strengthen their M&A competency to increase shareholder value and gain an ever-greater competitive advantage.
Transaction Advisors Institute provides M&A professionals with educational resources, tools and best practices to improve deal processes and outcomes.
Not being involved early enough
Lack of sufficient resources
Dealing with complex technical environments
3“Johnson & Johnson Announces Plans to Accelerate Innovation, Serve Patients and Consumers, and Unlock Value through Intent to Separate Consumer Health Business,” jnj.com, September 2021; “Dow advances strategic focus with sale of flexible packaging laminating adhesives business to Arkema,” PRNewswire.com, May 2024.
Several recent high-profile divestitures have provided outsized examples of the strategic value of shedding assets to grow shareholder value.3 Yet a gap persists between the potential of divestures and what management often thinks is possible. Research by Emilie Feldman, a professor at The Wharton School and author of the book Divestitures: Creating Value Through Strategy, Structure, and Implementation, shows that divestitures actually create more value in aggregate than acquisitions, yet many CEOs still favor M&A and organic growth as their value creation initiatives4
Get active in the planning. An emerging best practice for firms considering divestitures is to think through separation challenges ahead of striking a deal and build specific plans to get ahead of them. IT leaders’ deep and detailed understanding of systems, workflows, critical dependencies and areas of risk make them uniquely positioned to support this process.
Leverage TSAs. A well-structured Transition Service Agreement is a powerful strategic asset. It can enhance a seller’s negotiating position, minimize liabilities and preserve key customer and partner relationships, all while giving the divesting entity a crucial buffer to execute a smooth, controlled, disruption-free separation that maintains deal value. When crafting a TSA, it’s best practice to set finite termination dates to avoid extended dependencies that could stall progress or introduce risk.
Engage an expert partner. Disentangling systems is extremely complex and demands specialized expertise, especially in critical areas like data governance, cybersecurity and compliance. With only 14% of dealmakers considering their organizations technologically mature6, partnering with an experienced service provider can be invaluable. Choose a partner with a proven divestiture track record and a transparent high-touch approach. The stakes are too high for trial-and-error, and active, open collaboration is vital to achieving a seamless mutually successful split.
4Feldman, Emilie (2022). Divestitures: Creating Value Through Strategy, Structure, and Implementation. McGraw Hill. 5TransactionAdvisors.com 62024 Global Corporate Divestiture Survey, Deliotte.com.
And a survey by Transaction Advisors Institute of serial acquirers found that while divestitures are crucial to most firms’ growth strategies, they tend to be deprioritized: fewer than half of respondents have a divestiture playbook (compared to 94% for M&A), and only two-thirds have regular portfolio reviews that include divestiture candidates. The Institute also found that anticipated challenges with “separation of IT systems” is one of the top blockers holding companies back from more aggressively pursuing a divestiture path, despite the clear commercial advantages.5
The concern is understandable. The process of unwinding systems and separating data is a significantly different, more challenging and inherently riskier undertaking than knitting them together. Divestitures also impose time constraints that are absent from acquisitive transactions, adding tremendous pressure to an already-tense process. IT leaders can play a pivotal role in allaying technical concerns and empowering their organizations to confidently pursue this underutilized tool to unlock value:
