Know Thyself-and Thy Acquisition

May 18, 2011
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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.

Originally published in CIO Digest, October 2007 , Copyright © 2007 Symantec Corporation, republished with permission.

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