After the Merger: Integrating IT

When one company acquires another, many things change. Two cultures must meet and come to a truce. Some jobs may be lost, while others shift to a new location or new set of duties. Both companies’ customers wonder whether they’ll experience any growing pains.

And at the core of every merger, there’s the looming question of information technology (IT). The principals must decide whether to convert one company’s users to the other’s systems, whether to cherry-pick some programs and systems from each side, or whether to leave well enough alone. They might even decide to chuck everything and start with a clean slate.

The decision-making process usually begins during the acquisition’s due-diligence investigation period. Depending on the type of merger under consideration, the acquiring company may be able to find out quite a bit about the target company’s systems and software—or they may be able to find out precious little.

If a public firm is buying another public firm, it’s unlikely the buyer will be allowed to poke around in the target firm’s IT department, says Steve Sapletal, managing partner at On Point Consulting, an IT consulting firm in Minneapolis. The information is considered too sensitive.

But more rounds of due diligence are permitted when the company under consideration is a private one. “You can start asking some questions,” Sapletal says. “You can sit down in private with the IT team from the target company and do inventory, request reports on performance and stability, and so on. You often can’t do that with private equity companies or public companies.”

In the case of public-firm mergers, it’s quite common for the acquiring company to find that its new partner’s system is held together with metaphorical duct tape and baling wire. For example, there may be staffers staying up all night to hit the reset button whenever their aging legacy system seizes up. So if at all possible, the merger should go forward under the assumption that not all of the so-called assets will turn out to be, well, assets. Some data will probably need to be migrated, some software updated, and some hardware replaced.

But are the problems of a company’s IT systems really enough to put the kibosh on a potential merger? “Most organizations aren’t merging because of IT skills, IT apps, those kinds of things,” says David Minkkinen, partner at BearingPoint, a technology consulting firm in St. Paul. “A lot of those things are thought of as commoditized. If it’s just back-office stuff, then it’s probably not a critical asset that they’re gaining as far as the acquisition.”