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Fri 3 Nov 2006 04:00 PM

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Go MA&D, Gartner tells CIOs

Mergers should be seen as opportunity, says analyst

WHEN ONE company buys another it generally has an enormous impact on the IT departments of the two firms, not least because greater ‘synergies’ between IT systems are usually cited as a major source of cost-savings.

However, while CIOs may be forgiven for perceiving mergers, acquisitions and divestment (MA&D) activity as a threat, they should actually be treating it as an opportunity.

At least, that’s the view of research firm Gartner, which claims in its report ‘Timing is Everything in Mergers, Acquisitions and Divestments’ that cost-saving CIOs who approach organisational MA&Ds as an opportunity to grow staff and strengthen IT assets put their companies at a significant advantage over those who view them with trepidation.

For the deal to go smoothly, CIOs should also work with their counterpart CIO in the other company as early and as often as possible rather than keeping them at arms length, according to the research firm.

“Integrating the IT systems of two or more enterprises is a vast, complex and potentially costly process and it is a major challenge for the information systems organisation,” said Dave Aron, vice president and research director at Gartner Executive Programs.

“However, if the process is handled in the right way, it can provide the opportunity to upgrade and update existing systems for overall business benefit.

When undergoing a merger, divestment or acquisition, it is essential that the CIO is involved in the process, the research found, rather than being sidelined as a mere functional expert.

“Proactive CIO involvement in the MA&D process can also play a significant role in identifying and reducing information and process-based risks that span multiple business areas, as well as spotting opportunities related to that information,” he added.

As well as being involved during negotiations, CIOs also need to be kept informed of the company’s merger and acquisition agenda ahead of any potential deal.

Awareness of potential mergers and acquisitions should be a key consideration when building a scalable enterprise architecture, for example, according to Gartner.

“Organisations which are MA&D ready tend to have a CIO who has been engaged in the process from an early stage,” said Aron.

“In such cases, the CIO is ideally placed to both maximise the value of future integrated systems and retain employees who will be of long-term value to the organisation.

“With MA&D deals on the rise again, CIOs need to understand and influence their enterprises’ MA&D agenda.”

Other best practices identified by the research include the importance of creating and constantly reviewing a set of core strategies that help to build an MA&D capability; and engaging the most able and experienced staff during the deal rather than relying heavily on external consultants which can be risky and more expensive.

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