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Does early CIO intervention determine the success of an M&A? Part 2

Posted by Jack Noble | 20 Jun 2011

Jack Noble, EVP and head of global services at Fujitsu’s Global Business Group:

Jack Noble, EVP and head of global services at Fujitsu’s Global Business Group: "The CIO is often one level removed from the main action, and the secrecy that surrounds deals."

Ideally, the CIO would be involved in any M&A deal right from the get-go. Unfortunately, in my experience, that’s rarely the case. It’s amazing how quickly after a deal is struck that perceived problems shift from purely financial issues (such as revenue growth and cost-cutting opportunities) to practical concerns. This is typically when the spotlight turns on IT — and often, that’s far too late.

Plenty of M&A deals fail to deliver on the promised productivity gains and cost savings because no one bothered to look early enough at systems compatibility. Over time, this will undermine the expected value of a deal.

Once the honeymoon is over, plenty of organizations find that they face an arduous journey integrating and rationalizing IT infrastructure. Too many, meanwhile, find that the process is likely to cost them a great deal of money.

So why is the CIO not invited to the negotiations earlier? To my mind, it’s because M&A deals are typically driven by the CEO, and in many organizations, the CIO reports to another C-level executive. In a sense, the CIO is often one level removed from the main action and the secrecy that surrounds deals, which  excludes anyone from that “second tier” of management.

Also, because an acquisition is seen as an external activity, and the CIO is viewed by senior management as having an internally focused role, their contribution is not seen as particularly relevant.

In some cases, to be fair, the CIO does have a seat on the board — but even then, he or she may only be called upon for some core numbers and information. It’s still a peripheral role in the deal-making.

In some ways, however, that may work in the CIO’s favor. It can be to the CIO’s advantage that they weren’t adequately consulted beforehand, because it affords them the opportunity to “save the day.” A great CIO who has a solid plan for systems integration could go from “zero to hero” in an instant.

But it can be a poisoned chalice. You’ve got to be able to make that plan work and deliver the projected savings, or you’ll go from hero to zero just as quickly.

Smart CIOs often use the prospect of a post-merger systems integration project to get their budgets expanded. It may even be an opportunity for some of them to get long-awaited improvements signed off by the executive team. But they need to get the integration work done at the same time as running day-to-day and ongoing projects. It’s a lot to take on.

In global deals involving very large organizations, we often see companies bringing in third-party, outsourcing services in order to standardize tools and processes across the two businesses that are coming together. That, of course, places extra pressure on the CIO to negotiate good deals for such services — but it’s also another opportunity for them to take center stage and shine.

In general, the level of involvement a CIO enjoys in an M&A deal will vary according to their role within the company. But if a CIO is responsible not just for running internal systems, but also for providing strategic information and data to the wider executive base, then the earlier they get involved, the better.

Jack Noble is EVP and head of global services at Fujitsu’s Global Business Group.

• Do you agree with Jack Noble? Have your say by commenting below. See also another point of view on the M&A debate, from Hugo Sarrazin, a director in the Silicon Valley office of management consultancy McKinsey & Co.

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