Al Bsharah Business Minded, Technically Inclined

Merger and Acquistion – How to Fail at it from a Technology Perspective

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merger acquisitionI thought it would be fun to take a different perspective on how to go about merging or acquiring a company…by focusing our undevided attention on how to fail at it.  This article focuses mostly on the technology aspects and skips over Human Resources, Finance, and other non-technical areas.  I will spend a little time on Operations, though…as Technology and Operations should be heavily intertwined.

This topic was spawned by the numerous articles out there discussing the varied emergency mergers and acquisitions that seem to be happening due to our economic situation.  It seems that there has been a subtle swing in reasons for a merger today compared to the pre-economic meltdown environment.  Previously, companies would merge not only for financial gain but for the ability to spread their wings, improve their position in the market, and stretch their product focus to new boundaries.  Today, many of the mergers happening are based in large part (if not completely) on financial survival.  Survival being the key word.

Having recently gone through a post-meltdown merger NOT focused entirely on survival (CenterBeam Acquires Network Insight), and being largely responsible for the initial merging of these companies from a technological perspective, it seemed appropriate to share my thoughts on this.  As CenterBeam, I’d like to think we’ve done a very good job at mitigating the below risks, or avoiding them entirely.  Of course none of us are perfect, but I’m proud to say that we’ve accomplished a lot in a short time frame and haven’t destroyed anything along the way.  Yet, there’s still plenty of work to do.

Don’t get IT Involved Early

A common theme through many of the articles I’ve read over the past 6 months is that IT wasn’t involved in either the decision making, the planning processes, or both.  In this day and age, you simply can’t afford to do that.  If you don’t have an IT department (or an “IT guy”) in your company, you’re likely outsourcing it.  If you’re not doing either, we’ll call you and your company “unique” and move on.  <smile>  The important point is that in many organizations, the accelerated proliferation of technology over the years has become the glue to keeping things moving smoothly through your organizational process flows.

When was the last time your email server went down?  How much of a screeching halt did your company come to because of it?

Get IT involved as early as possible.

Don’t Use Proper Project Management Resources

In a previous life, I was a Project Manager and even led a team of them at one point.  Despite the title no longer residing on my business card, I still wear my Project Management hat on a near-daily basis.  As someone who’s worked in the IT-based Professional Services industry for 10 years, I can say…without question, hesitation, or doubt…that project management is a vital aspect to successful technology projects.  A small project can get by with a solid technological resource who knows how to manage his tasks, but that’s not what we’re discussing here.  A project of any scale requires multiple Subject Matter Expers (SMEs) working in harmony, with numerous dependancies on each other, over a lenthy period of time.  The only way you’re going to keep that herd of cats moving in the same direction is by using a solid Project Manager, or Project Management team.

In the Professional Services world, customers will often balk at getting billed for Project Management hours in their projects because they don’t understand the benefit.  Having lived and breathed it, having seen projects succeed and projects fail, and knowing wholeheartedly that much of that success and failure had to do with the level of project management involvement…it would be silly to avoid proper project management.

Our VP of Operations provided me with an exceptional quote the other day:

“If you can’t take the time to do it right today, when will you find the time to do it over?”

This applies to so many areas of business.  Don’t skimp on Project Management, you’ll only pay more later.

Don’t get Appropriate Subject Matter Experts Involved

SMEs are your best friends when championing or managing an IT project.  If you plan without them, or without their input, you will miss things…you will forget something…and your struggling project will cause grief for many.  Better yet, don’t limit yourself to just asking for their input.  They need to be active players and stakeholders in the project, so give them the responsibility to be successful with you.

You are not a super hero, regardless of the underoos you sport!  Don’t work in a bubble.

Don’t Spend Time Researching Both Networks and Systems

If you’re an IT Manager, CIO, CTO, or other technology leader…and you’re working in an organization who’s core focus is not technology…odds are that you might not be very much involved in the “go” or “no-go” decision making regarding the merger or acquisition.  This is OK in most circumstances.  What’s not ok is for you to sit back, accept the decision and deal with the consequences.  You still need to do your dilligence.  You have to consider how both organizations are functioning, on what types of systems they are functioning, what the short-term merger solution is and what are the long-term merger solutions going to be.  Beyond this, you need to know the risks, requirements, and effort necessary for you to be successful.

A subset item to this is having an understanding of how the two disparate systems will actually work together in the future.  There have to be distinct visions for what the merger will look like in 2 months, 6 months, and 12 months…and you need to be considering this well in advance of any acquisition.

If you are working in a technology-based organization, and you’re a high-level technology leader, you need to be a part of the decision-making process.  The executives will be looking to you for appropriate analysis and decisions on whether this is the right solution.  Everything mentioned in the above paragraph is still mandatory…and it’s mandatory that your peer leadership team hears what you have to say.

The bottom line here is that the Executive teams need to understand the entire cost structure required to merge the two companies, whether they are based on technology or basket-weaving.  If they don’t understand the cost basis, and it runs out of control because dilligence was not performed (or listened to), the acquisition is an immediate failure.

No one loves homework, but you need to do yours.  Thankfully, you can do a lot of your homework at work.

Don’t Sweat the Workload Requirements…You’re Acquiring or Being Acquired!  There are Now More Resources to Do the Work.

This one scares me the most.  In this economy, companies are downsizing dramatically.  Last week alone 100,000 jobs were lost.  ONE HUNDRED THOUSAND.  In ONE WEEK.  Insanity.  This means that everyone in the company is going to be asked to do a little more, with a little less.  It’s incredibly likely that the company acquiring you, or the company being acquired by you, has a heavy workload on their employees already.  Adding headcount due to acquisition does NOT mean you have more people to do new work.  It means you have more people that already have full-time jobs, and you now have to find a way to merge these organizations with your existing headcount (as it’s pretty unlikely you’ll be getting any more heads).

Even in a normal economy, this is still a frightening proposal.  Understand the workload of your employees and those being asked to perform merger duties.  Of the employees critical to the integration, work with their supervisiors and peers to understand their workload, existing projects, and abilities to balanace additional responsibility.  Otherwise, risk severe inaccuracies to your time estimations, commitments to Executives, and deadlines.

Know what can be done, who it can be done by, and in what timeframe.  Know it well.

Don’t Bother Planning for Change

So, you’ve heeded the above advice…you’ve got your ducks in a row and everything is moving along as you’ve hoped.  The plan is set in stone, risks have been identified and mitigated, stakeholders and SMEs have been identified, everyone knows their responsibilities, and project management is on it.

What’s wrong with the above paragraph?  “The plan is set in stone…”  Come on.  You know as well as I do that nothing (nothing) is ever (ever) set in stone.  Your deadlines will get moved.  New customers will drive requirements that throw wrenches into your well-formed plan, cascading further issues throughout the project.  There are any number of items that can cause problems.  Your job is to forsee these and build flexibility into your plan.

Be nimble, be quick, be prepared to jump over that candle stick.

Do Not, Under any Circumstances, Focus Your Efforts on the Employees

The first thing to approach in just about any acquisition I can think of, is the employees.  If you ever expect to perform as a single organization, one company, one unified front…get your employees on the same collaborative systems as soon as humanly possible.  If you don’t, all communication between the two companies will be haphazard and many, many, many things will fall through the cracks.  One of the first things we did at CenterBeam was get Network Insight employees dialed into all the CenterBeam systems (email, instant messanger, intranet, file systems, human resources, etc).  We did this in roughly one month.  Not bad, considering the network and systems effort required.

The point is, we’re still working on the integration and merger.  I expect it to go on in various phases throughout the year.  But, since our employees are now “one”, it makes our integration life so much easier.  Because we’re already working as a single unit, getting the company to function as a single unit will be that much easier.

Employees first, without them you’d be job hunting instead of reading this.

Don’t Rush it…Our Companies aren’t Going Anywhere…We Have Time

Procrastination is NOT your friend, especially when it comes to acquisition.  We all know what happens to things that get “put off”.  Something else always comes up with higher priority, and the items sitting on the shelf waiting for completion will never get attention again.  Stoke the fire while it’s still hot.  If you’re not well on your way after 2 months, 75% complete after 6 months, or finished in 12 months…something is seriously wrong and you need to re-evaluate the acquisition project and get Executive sponsorship back in the game to prioritize and finish things up.

If you’re not fully integrated, your employees are spending valuable time and money working around operational inconsistencies when they could be focusing more on productive endeavors.  Get on your integration horse and ride hard.

Conclusion

This is by no means an all-encompassing look into how to be successful at a merger and acquisition, even just focusing on the technology.  However, these are all very important aspects that in many circumstances get overlooked, undervalued, or shrugged off.  Treat these items with the respect and attention they deserve and you’ll at least be on your way to a successful M&A.

Image Credit:  business-sale.com

About the author

Al Bsharah

Al’s been involved in multiple San Diego startups since 1999 after leaving the Detroit auto industry as an electrical engineer. He's started two of his own companies where he's raised capital from both VCs and angels, and sold one of them to both Seismic and Return Path. He resides on the board of Startup San Diego, is a Tech Coast Angels member, and has graduated both Techstars and Founder Institute accelerator programs where he now mentors. Al is currently the Vice President of Product Strategy at Seismic and in his free time he manages to play a little beach volleyball, trade stocks, and camp with his wife, son, dog, and friends.

3 comments

  • Al,
    What?? An IT "guy" promoting collaboration? An IT "guy" checking folks on procrastination and dilly-dallying? An "IT" guy encouraging understanding the reality of an employee’s workload and working around that accordingly (instead of dumping more on ’em)? WHAT is this craziness?
    Am I in Alice’s Never Never land? And was there even a Never Never Land? Did I mix up my fairy tale stories?
    Okay, I digress.
    Love your thoughts… now, tell me, how often do you see people heeding them?
    Would love to figure out a way to inundate people with our different thoughts on the same coin…
    besides, we share a mutual admiration for a certain fabulous lady: Nancy.
    isn’t that reason enough for us to swap blog love? <smile>
    Tanya

  • Haha… Thanks for the reply, Tanya!

    Fairy tales aside – <grin> – it can be tough to find organizations that not only believe these theories, but actually practice them. I’ve been lucky enough to work in organizations over the past 10 years (Network Insight and now CenterBeam) that earnestly try to live by these philosophies. Granted, we’re far from perfect…but I’d like to think we do the right thing many more times than not.

    Being in an organization that does professional services and managed services for IT organizations though, we kind of HAVE to live by these rules. If we don’t, we don’t get paid! We do, however, eat a healthy portion of our own dog food…for our own internal projects.

    In doing professional services for IT organizations, we’ve struggled at times to get various teams to understand the real benefit of things like dedicated project management, etc. It’s no doubt a tough sell, and people who’ve never had it sometimes just don’t know what they’re missing…and it’s always the first thing to get axed when budget is a concern.

    That said, I have found that over the years many folks have educated themselves on these benefits and are certainly more warm to them these days than in the past. I’m not sure if I’m in some kind of bubble here, but I’ve been pleased with the shift. We’ll see if the economy changes that much…!

    Sorry, this turned into a much longer reply than I envisioned. <laugh> Nancy is amazing, ‘eh?

    Cheers, I’ll be sure to check out your blog!
    AL

  • YES! Great piece, keep up the terrific work. This is the type of information that should gain recognition for it’s craft. More writers should learn from you. This is right on the money.

By Al Bsharah
Al Bsharah Business Minded, Technically Inclined