BY L. GARY BOOMER
The role of IT in
mergers and acquisitions
It’s no secret that today mergers and acqui- sitions are an extremely active part of the accounting profession. These combinations are due to numerous reasons, with retirement, leadership and growth at the top of
the list. As owners reach retirement age, they
are looking for an exit strategy. At the same
time, growing firms are looking for merger
candidates to gain clients, to gain access to
needed staff skills, or to establish a presence
in a desired market location. With a marketplace like this of buyers and sellers, it’s no
wonder there is plenty of activity!
Unfortunately, far too often, the M&A process is conducted in tight secrecy, with only
a privileged few aware that the acquisition is
even being planned, let alone the timelines
and agreed-upon conditions. In this scenario,
it’s not unusual for the IT staff of the gaining firm to be told, “We’re bringing in 20 new
people next week. Get them set up and ready
to work.” While this might be a slight exaggeration, it is closer to the truth than many
might believe.
A far more productive approach is a proactive one in which IT leadership is involved
early in the planning process. After all, other
than people, IT infrastructure is the largest
investment for most firms, and is a critical
strategic asset for firm innovation and growth.
Early and detailed IT planning can make a
merger or acquisition unfold smoothly and
productively for all concerned.
The Boomer Technology Circles, an organization of over 100 technologically progressive firms, has been the forum for a number
of lively discussions on this topic. The rest of
this article will draw upon those experiences,
and capture some best practices and lessons
learned in M&A planning.
Don’t expect to get this information from
M&A consultants. This information may
cause you to rethink the importance of technology in any deal, especially in today’s environment, where technology is an integral
part of all services. Technology is part of a
firm’s culture — either they view it as a stra-
Gary Boomer, CPA, is the president of
Boomer Consulting, in Manhattan, Kan.
tegic asset or as overhead. Technology may
change or even become a deal-breaker in
some transactions.
KEY CONSIDERATIONS
Planning from an IT perspective should begin
as early as possible in the process. Many firms
have found it useful to establish a transition
team (in both firms) and to have counterparts
on each side communicate important details
at a level appropriate for each.
Areas of investigation and discovery often
include:
Hardware: Examine the age, brand,
model and configuration of key hardware
elements in use in both the acquiring and
the acquired firm. This examination should
include file servers, related networking gear,
desktop and notebook computers, and, most
recently, cell phones and PDAs. Many firms
have found that a “rip and replace” approach
is least costly in the long run. Regardless of
the age and condition of the acquired firm’s
equipment, support burdens are reduced
when that equipment is replaced with the
standard in place at the acquiring firm. This
facilitates “ghosting” machines with a standard application image and simplifies periodic updates with patches, service packs and
security enhancements.
Desktop and laptop computers are a small
part of the overall IT expenditure, yet this is
where most people focus. The real investment and support comes in the infrastructure, which supports the need for standards
and defined unique processes.
Application software: Experience has
shown that the greatest efficiencies are
achieved when applications are standardized across the combined firms. This means
one tax software, one audit application, one
e-mail system, one document management
program, and so forth. Two major considerations with application software are data
conversion from a replaced system to the
new one, and end-user training. According to
Gartner Group, for every hour of training, you
acquire five hours of increased capacity.
Network architecture: This increasingly
refers to the use of remote access technolo-
gies such as Citrix or Terminal Services to
access application servers, and now SaaS or
the cloud. If the acquired firm has not used
these technologies, but the gaining firm does,
there will be significant training issues involved. Running a centralized application
base has its own set of licensing issues, but
also saves hardware expense at the remote
office location. Many firms have moved all or
part of their infrastructure to the cloud. The
recent hurricanes and tornados have shown
the advantages.
Physical location: Will any owners
or staff physically relocate because of this
merger? Will both offices remain open and at
their full pre-merger strengths? These questions and many others will impact a variety
of space and facility issues. The acquiring
firm’s IT department may have to plan for
additional network cabling, additional telephones, the relocation of shared printers and
scanners, and various back-office network
configuration issues. With reliable and fast
remote access, firms can reduce their office
space requirements. Work is what you do, not
where you go!
Security issues: The acquired firm will
have to be converted to all the security measures in place at the gaining firm’s network.
This will include password policies and standards, policies on usage standards, and even
the degree of control each individual has over
their own computer. Many small firms allow
a high degree of user customization, while
larger firms control this at a centralized level
through network control measures. Security
and client access to data generally improve
as firms move to the cloud.
Communications: If the merger results
in the addition of a new office location, the
gaining firm will have to plan for wide-area
network connectivity and integration of
phone systems. In many cases the pre-merger
firms will be using different communications
vendors and service providers. Contracts will
have to be renegotiated to add the additional
users and locations, while hopefully gaining
some price reductions through economies
of scale. Other communication issues of-
ten include standardizing cell phone ser-
vice providers, and creating or expanding
shared pools of calling minutes. Support of
cell phones and PDAs is rapidly becoming
a major issue for IT departments due to se-
curity and the rapid change in both phones
and plans. Standards and adherence to firm
policies are extremely important. Consumer
electronics are driving the market. Good ex-
amples are the iPhone and iPad, which are
often purchased by partners and require sup-
port from I T.
