Know Thyself-and Thy Acquisition
Successful M&As are often those that make IT integration
a priority
by Peter High
Mergers occur for a variety of reasons. Some companies want access
to new geographies; others seek a quick path toward new products
and services that complement their own; still others believe they
can run the acquired entity more efficiently. The key to the successful
integration of two enterprises is having a good, honest, accurate
view of each company's capabilities, systems, and infrastructure.
The acquiring company must understand the other's core business
processes and the systems that support them in order to more easily
map those processes into its own.
Companies that acquire within their own industry often inherit
similar core systems. In the banking industry, for instance, many
aspects of information technology are highly standardized.
By contrast, McKesson Corporation is not nearly so standardized.
The San Francisco-based company is the largest healthcare company
in the United States, and its business lines are diverse, including
pharmaceutical solutions, medical-surgical solutions, and provider
technologies.
Randy Spratt became McKesson's executive vice president and CIO
in 2005, joining the company through its acquisition of HBOC in
1999, and is tasked with managing several technology businesses
as well as strategic planning and process re-engineering for McKesson's
technology division. Having experienced life as the acquired and
as the acquirer, Spratt has learned many lessons that apply to
any large acquisitive company.
A typical acquisition affects every function in both companies.
As part of the acquisition process, integration teams are formed
for key functions such as HR and finance. Since IT changes are
often core to the acquisition, there is an emerging trend to have
IT play a central role in overseeing these changes.
Although all acquisitions are different, at McKesson Spratt's
team guides the process with a variety of standardized templates
and tools. The company has a set of bylaws for integration, and
Spratt introduces these to the project team early in the process.
Once the project team is formed and "kick-started" down
the integration path, Spratt's group steps aside into more of
an advisory role, focusing on capturing lessons for future integration
projects.
On November 6, 2006, McKesson announced it would acquire Per-Se
Technologies for $1.8 billion. Sixteen work streams were identified
for the merger integration, and each had a manager who reported
to the overall Per Se integration manager. The integration managers
reported jointly to Spratt and the key operational executive.
Each integration manager developed a plan independently, then
presented it to Spratt, the operational executive, and the other
managers at a two-day session. Adjustments were made to ensure
the plans fit together and then published on an intranet site.
As the integration proceeded, progress was charted online so all
relevant constituents could track where the project stood.
As Spratt notes, "We put a lot of money into buying a company,
and if we do not focus on capturing the synergies right away,
the anticipated value creation will vanish."
What really helps is identifying which aspects of the acquisition
are sine qua non for success. At McKesson, there are several non-negotiables
when it comes to systems. In Spratt's opinion, McKesson standards
for acquired companies are:
- Network connectivity
- Productivity tools (Microsoft Outlook and Office)
- Messaging and identity applications
- Human resource information systems
- Telephony (land lines, cell phones, PDAs)
Through this process of IT and business integration, executives
leading the acquisition must act quickly and decisively, and communicate
regularly with employees. The degree of change needed can understandably
lead to considerable churn within the acquired organization. The
faster, more deliberate, and transparent the change, the more
quickly people can return to doing business with confidence.
Peter High is president of Metis Strategy, a Washington, D.C.-based
consulting firm specializing in the intersection of business strategy
and IT.
