Mergers and acquisitions have forever been part of the corporate landscape but some work far better than others. One bellwether for success may well be how early the IT teams at the respective companies get involved in the discussions.
“It’s imperative that IT be involved from the start,” says Enrique Smith, head of corporate integration at BlackRock, an investment firm with more than $4.6T under management and 12,000 employees around the globe. The very fact that BlackRock has someone with Smith’s title is evidence of how much thought it puts into integrating firms that it acquires. The role of his group is to uncover factors that the corporate M&A teams may not consider because they aren’t purely financial, but nonetheless have an effect on the company’s ability to execute and, perhaps, its reputation. That includes scoping out operations of a potential acquisition target as well as HR, legal, and IT.
From a previous employer, Smith has seen what happens when IT is not involved early on. At one point, his New York-based company merged with a firm based outside Chicago. The firm had crucial IT systems running in the Chicago office, but Smith, who had just been brought on as CIO, had not been consulted about what it would mean to close that office.
“So we made the decision that all the technology was coming over from Chicago to New York,” Smith says. “By the time they made the decision six months later to close the Chicago office, we were in a very good place.”
At BlackRock, that sort of thing doesn’t happen. The firm solicits feedback from “diligence captains” in different parts of the organization, including operations and IT. All the feedback is turned into financial metrics. Perhaps the ops group identifies a process currently done manually that could be automated by IT. IT will come up with a cost and timeframe to complete the automation and plug that into the model.
To integrate or not to integrate
When it acquires a company, BlackRock also assesses which systems need to be integrated. If the company has a technology driven process that’s part of the reason for its success, but different from anything BlackRock has, that may be acceptable.
“If it’s complementary in nature and function, that makes for easy coexistence,” Smith says. If, however, the acquired company is using a competing technology to what already exists within BlackRock, that becomes a more difficult discussion and is more likely to involve a migration away from the technology.
“If you have competing technology but similar processes, you can retrain people [on alternative technology], or do best of breed and create an architecture that’s using the best pieces from the two companies,” he says. It’s unlikely that incompatible IT systems will scuttle a deal. Rather, the integration effort is often one that the IT group readily accepts as a challenge. “These are some of the times when you get the most excitement at work,” he says.
If the acquired company is using cloud technology, that can help simplify the integration process because it’s typically quite clear where such assets begin and end. BlackRock doesn’t use cloud services internally so typically pulls such services in-house. But at Smith’s previous employer, “cloud services were some of the low-hanging fruit that we were able to connect early and claim wins.”
Dealing with people issues
What can be thornier is dealing with the various personalities and titles involved in an acquisition. You probably don’t need or want two CIOs, for example.
“Hands down, that’s the trickiest part of an integration. This is where you really make a lasting impact as to whether you’re truly integrating something into the company or just taking on assets that the other company had,” Smith says. “If you value the people as part of the asset, you’re going to take a lot of care with the cultural aspects of onboarding.”
As is so often the case, communication is crucial to success. If you simply send out offer letters to new employees and surprise them with the contents, don’t expect much success.
“Announce things early, get folks involved in the process, communicate frequently,” he says. “When folks know they’re coming into an organization where they’re going to be cared for, when it’s spelled out what the process is, and they feel like they get to participate in some fashion, then you’re going to have a much higher adoption rate to the process, and a lot less rejection."
