In this episode of the Business Excelleration® Podcast, How can IT organizations can create greater synergy as part of the mergers and acquisitions process? A discussion with The Hackett Group Principal Michael Fuller, Director Todd Musgrove, and Principal Kyle Robichaud.
Welcome to The Hackett Group’s “Business Excelleration Podcast,” where week after week we hear from experts on how to avoid obstacles, manage detours and celebrate milestones on the journey to world-class performance. This episode is hosted by Gary Baker, Global Communications director at The Hackett Group. Today’s episode will discuss how information technology (IT) organizations can create greater synergy as part of the mergers and acquisitions (M&A) process. His guests are The Hackett Group’s Principal Michael Fuller, Director Todd Musgrove and Principal Kyle Robichaud.
To begin, Kyle unpacks the things driving companies right now to look at M&A synergies. The first element is around the economic downturn we are currently seeing. Companies that haven’t gotten all of the realization out of deals they have made over the last few years are seeing issues with cost pressures and stock prices going down. Going back to previous deals and identifying synergies can help the business attain some of the finances that were originally identified. In some cases, clients are considering revenue-driving synergies as cost savings. IT is one of the biggest drivers of cost synergy since it touches every driver within a business. Additionally, revenue is a driver because there is so much overlap in the market that companies are looking for the opportunity to expand their revenue base. Ultimately, M&A activity is a multiplier effect. While companies are mainly focused on cost, they are also considering the product revenue aspect.
Next, Todd explains where companies are struggling to capture and identify. On one hand, they are having difficulty making sure they have the right framework and process around synergy identification and tracking and monitoring the realization of those synergies. This includes the tools and templates for synergy tracking. IT cost synergies are usually the easier ones for clients to identify, track and capture. Some digital transformation synergies are business led in their identification.
Then, Mike touches on some of the core areas in which companies are driving the most value in IT synergies in terms of M&A. From a consolidation perspective, companies have moved to the cloud. Certainly widely adopted, cloud strategies should play a key part in any organization’s synergy capture for IT. When data centers are rationalized and consolidated, however, they can be expensive. When it comes to digital transformation, being able to help a less mature company leapfrog provides a tremendous amount of opportunity. Kyle adds that the type and size of a deal will drive where the focus will be from a synergy perspective. A small acquisition of a less mature company will present lots of potential benefits for optimizing both vendors and contracts while driving better price negotiations. When mergers of equal standing come together, it becomes easier to identify where synergies are coming from. The harder decision in this instance is in making business decisions to go about merging.
Before wrapping up, Kyle shares The Hackett Group’s methodology for helping companies in this area. M&A synergies are part of their larger approach to help support IT M&A on all fronts. They have a standard approach for identifying IT M&A synergies across the landscape. Where The Hackett Group can provide the most value to their clients is not just in where to find synergies, but also in helping them determine the key projects and initiatives that need to happen to ensure those synergies are achieved. Clients are encouraged to have a process to track and measure the realization of those synergies over time.
- 0:56 – Welcome to this episode hosted by Gary Baker.
- 1:12 – Kyle unpacks company drivers
- 3:15 – Where are companies struggling?
- 7:57 – The core areas companies are driving the most value in IT synergies.
- 10:05 – Kyle’s perspective on where companies are finding value.
- 11:22 – The Hackett Group’s methodology for helping companies in this area.
- 13:22 – Thanks to Michael, Todd and Kyle for joining us today.