Perceived Synergies for M&A integration
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Hi
I am interested in understanding everyone’s views on the importance of not only identifying the value that an acquisition can have from a business perspective, but also how important it is to understand the cost of technology integration between the businesses?
I feel that the technology integration may be largely an overlooked part in the merger; or even if not overlooked it perhaps is not looked into much deeper. We know from experience that new system implementation even in a standalone company comes with lots of challenges and most implementation projects are not delivered on time and within budget. I believe technology integration would warrant some hard choices and it may not be a technology integration but may be a technology “migration” where the better technology survives and takes over the business from the systems that are abandoned. Most of the times the technology that survives would be that of the acquirer unless the acquisition itself is made with the purposes to acquire the technology. Consequently, cost of technology integration is likely underestimated in valuations.
I would say extremely important. Having to migrate or merge technical platforms can be complex, time-consuming and costly. Coming from a company that develops software, having the right technical footprint is critical in product development and those product capabilities are often the drivers for mergers in the first place. This is definitely an area that deserves more time and thought.
I can absolutely second Lisa Hall migrating or merging technical platforms is likely complex, time-consuming and costly. Therefore from my experience this piece should definitely be assessed and vetted carefully whether it will be worthwhile the efforts and costs. For some companies it may be the better way of keeping the tech stack separate or looking into only merging / integration a defined set of the tech stack. However also it is the case that oftentimes Tech Stacks are very interconnected and have a lot of dependencies within for this reason it can be a challenge just migrating / integration a singly system. I have seen both examples in my career and both ways have their pros and cons.
I am conversing with a colleague right now that recently went through being acquired. Her biggest complaint was finding out after the fact how difficult the integration of the technologies between the two companies would be. It has taken her and her staff many months to try to get up to speed on the acquirers technology and it has caused a lot of strife in their offices.
Being part of a SaaS company, this is one of our primary concerns.
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For example, our platform infrastructure is on the Google Cloud Platform (GCP). In recent acquisitions, we have acquired companies using Amazon Web Services (AWS) and Heroku. Both are good technologies, but our Site Reliability Engineering (SRE) team wants to ensure we can provide the quality of service our customers demand. So, in all of our acquisitions, we have a robust team of senior developers and engineers review the acquisition technology stack to ensure it is possible to integrate, and how costly it will be in dollars and time.
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We have found that integration our HR, IT, and Financial systems has been much less work. CRM integration can be a bit more cumbersome as different sales teams will could have vastly different configurations. Our approach has been a gradual migration from those CRMs into our platform, and we know we can live with some CRM redundancy if the sales team is functioning well and selling profitably.
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Technology can mean different companies, but it is certainly a key concern in any acquisition.In my experience, lack of tech planning in PMI project was one of the biggest contributors to integration not being deemed a success. This concerns specifically the work flow system the acquired company used, how to access data it held and how to incorporate this data into internal systems and reporting of the buyer. Without this valuable information it’s difficult to influence the day-to-day issues of running the business, especially if located in a different territory. It’s an incredibly complex and expensive process and was nor properly addressed from the beginning.
Needless to say, lessons learned! Tech planning is now part of Due Diligence process.
I’ve seen it first hand where the organization kept the operations and technology integration as an after thought. It came as a knee jerk reaction where we had to pull people off other key strategic projects, and put together a whole separate team and plan to integrate operations while ensuring we were meeting daily production needs of both organizations.
Integration should always be a part of the due diligence.
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