Takeover targets

Takeover targets

Acquisitions can be a tricky time for CIOs - they must deliver on the taxing, emotional task of seamlessly knitting two businesses together.

It all sounds so exciting in theory. A company pulls off a coup, taking over a rival and the chief executive proudly spruiks to the sharemarket about the wonderful benefits, synergies and innovations that will result from joining forces with a former foe. As the cameras in the news conference flash and the two CEOs shake hands and grin, somewhere in the shadows stand an anxious pair of executives sweating over thoughts about what the future holds.

Step forward the chief information officers.

One consequence of a volatile global economy has been the continued emergence of new takeover gambits and mergers between weakened equals, but an inescapable fact of all major corporate transactions is that the role of the CIO is getting tougher and tougher.

Organisations today are far more advanced from a technology perspective than they were even a decade ago, and so, not to put too fine a point on it, the chief information officer has the power to make or break the deal when it comes to getting things to work.

However, picking the best approach to take as a leading technology executive is far from straightforward. There are a number of variables, depending on the nature of the merger itself. Not least in the minds of chief information officers and all technology staff is which side of the merger they fall on – dominant partner or submissive – the two parties have markedly different prospects.

Read: How to protect your systems during a merger

One leading CIO with experience on both sides of the fence is former Bankwest and Colonial First State information chief Tony Clasquin . He is now the interim CIO at listed property group Stockland, duties he performs while consulting to a number of different organisations.

He left Bankwest in the aftermath of its acquisition by Commonwealth Bank of Australia, but says chief information officers have a crucial role to play in all stages of merger activity.

This begins before a deal has been sealed, in the due diligence phase, when CIOs must have the courage to stand up and let their views be known.

"Things can often appear in one way, but the devil is always in the detail and as soon as you dig through the data you can realise that you have either something that is more valuable than you first thought, or more often, something that is going to be harder to integrate or of lower quality," Clasquin says.

"Due diligence has to be done well and there are lots of gotchas, which are not obvious, so your questions have to be very well tuned. As a CIO, I need to be able to pre-plan how it is going to play out post-merger, and this modelling often sways your decision about [whether to] buy it or more likely, whether the price of the acquisition is right."

While that may seem like a fairly obvious point, chief information officers are not yet universally granted the right to be a part of the pre-deal process.

Leading technology executive headhunter Paul Rush, of Robertson Executive Search , says this is a mistake that many boards are waking up to. He says M&A skills now form an important part of a CIO's resume when it comes to career moves. And more progressive boards seek to apply the expert eye of their information chief when it comes to scoping out potential targets.

Rush asserts that as a member of the executive team and as part of having a role in setting and agreeing on the overall business strategy, a CIO will be party to and inclusive of executive plans concerning growth. This will include input to scenarios dealing with organic expansion versus growth by acquisition.

"As a CIO and member of the lead team, it is important you come to the table well prepared and with genuine thoughts on the growth strategy for the business, at a business level, not an IT functional level," Rush says.

"This will include your contribution in terms of the right strategic direction for the company. If you are pro growth by acquisition, then you need to come prepared with high-level thoughts in regards to where to expand – which sectors and which geographies."

Clasquin says that whenever an acquisition is in the offing, the business and, most importantly, the CIO, much choose to adopt one of three different approaches: leave the acquired business alone and allow it to continue working as before; perform a partial integration; or fully integrate the business and all of its operational systems.

Clasquin says once the approach is decided upon, CIOs must not waver in their resolve, and must aim to execute their decision as quickly as possible.

"It is often not the technology that you choose that goes on to provide you with the competitive advantage, it is how you wield it," he says.

"Post-merger, a lot of people get stuck agonising over which system to use and that analysis ends in paralysis.

"A common mistake is [when CIOs] mess around with making the big decisions … Make the call and get on with it. Be very clear about those principals and be very hard about it."

Related story: Roger Jones of the recently-formed Auckland Transport discusses the successful melding of existing systems with new services.

The calls that chief information officers must be involved with making during the merger and acquisition process can be highly emotional. There are fewer times more stressful in the life of a corporation than the period just before and just after a merger.

For many of the workers on both sides of the deal, a desire to perform well in order to benefit their company is replaced by the goal of holding onto their jobs.

Chances are that they had an equivalent in the company on the other side of the deal and two employees into one role just doesn't go.

The feelings are the same at the top of the technology tree, where Clasquin has direct experience of finding himself in a situation where there was no clear future role. When CBA acquired Bankwest, it was obvious to most industry observers that it was unlikely that a CIO as experienced and respected as Clasquin would be keen to stay and play a support role to the larger bank's tech chief, Michael Harte.

Clasquin says the future career prospects for a chief information officer in an acquired organisation depend on the post-merger principle decided upon by the dominant business.

If the decision is taken to leave the acquired entity to function separately, then there is a clear continuity to the existing CIO's role, if a partial integration is planned, then an important, but different role for the acquired information chief comes into play.

"Obviously, if you totally integrate, there is no role after seeing the integration through, but a CIO is very important in that [transition]," Clasquin says.

"In that situation, it really is down to the CIO to steady the ship and make sure that all the resources are properly looked after as the process goes through.

"It is very important for looking after the people, the processes and retaining the insight for important business continuity purposes."

It was this situation that AXA's well-known information chief, Peter Mahler , found himself in, following the company's merger with AMP.

Following the deal in March, Mahler and his team worked on an integration plan with their peers at AMP, after which he left AMP's CIO Lee Barnett to take charge of the technology strategy for the combined entity.

"Lee [Barnett] and I spoke about it and I told her upfront that I didn't want her to feel nervous or apprehensive about the situation, as I was expecting to leave as a result of the changes," Mahler said in April.

Like Clasquin, Mahler has plenty of experience in merging information technology operations, most notably during the heralded five-and-a-half-year IT-based business transformation that took place at Coles Myer.

In the course of the program, he had to unify a business that was split along entrenched divisional boundaries. Brands such as Coles supermarkets, Coles Liquor, Coles Express, Kmart, Target, Myer and Officeworks all previously ran their own shows.

He says that a large part of getting the project moving was getting the right tech leadership team in place.

All staff in the top three levels of IT management under Mahler were asked to apply for new jobs, with applications and interviews co-ordinated impartially through a personnel consulting firm.

Clasquin concedes that many IT staff in acquired companies are justified in their fears that their equivalents have a better chance of retaining their roles in the combined entity. However, he says this needn't mean workers resign themselves to the prospects of the job queue.

He says a colleague's advice from earlier in his career has stuck with him. During a merger process, Clasquin was told that if he was to continue to work for the organisation through the tumult, then he must put aside his anxiety and work hard to ensure that whatever happened in the future, he could walk away with his head held high.

"There inevitably comes a point where there are too many people left in the organisation," Clasquin says. "But if you are taking a salary, then your job is to not get distracted by the angst and fear, but to do your job to the best of your ability until the day you leave. Ironically, if you are doing the job to the best of your ability then you will probably be picked to stay."

Of course, if you do end up staying, then the challenges of being involved in post-merger technology work are many. Both Clasquin and Rush agree that, as well as becoming more important, the role of the CIO in the M&A process has become increasingly complex in the past 10 years.

Clasquin says that as recently as the start of the decade, there were plenty of organisations that had much lower levels of automation across the business.

As more processes have become automated and more interactions between organisations have become technology driven, the task of seamlessly knitting two businesses together has become increasingly taxing.

"Now you have application systems and business stacks being automated, finance stacks are definitely automated, and you have infrastructure and external links to the market all on various systems," Clasquin says.

"Different companies also have different risk appetites, so you can't just link them together, because their security doesn't match. All of these aspects are invisible to other executives involved in a deal, and can only be seen if you are looking through the eyes of a CIO." MIS Australia

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