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Mergers & Acquisitions: The Sell Blueprint

For IT leaders who want to have a role in the transaction process when their business is engaging in an M&A sale or divestiture.

There are four key scenarios or entry points for IT as the selling/divesting organization in M&As:

  • IT can suggest a divestiture to meet the business objectives of the organization.
  • IT is brought in to strategy plan the sale/divestiture from both the business’ and IT’s perspectives.
  • IT participates in due diligence activities and complies with the purchasing organization’s asks.
  • IT needs to reactively prepare its environment to enable the separation.

Consider the ideal scenario for your IT organization.

Our Advice

Critical Insight

Divestitures are inevitable in modern business, and IT’s involvement in the process should be too. This progression is inspired by:

  • The growing trend for organizations to increase, decrease, or evolve through these types of transactions.
  • A maturing business perspective of IT, preventing the difficulty that IT is faced with when invited into the transaction process late.
  • Transactions that are driven by digital motivations, requiring IT’s expertise.
  • There never being such a thing as a true merger, making the majority of M&A activity either acquisitions or divestitures.

Impact and Result

Prepare for a sale/divestiture transaction by:

  • Recognizing the trend for organizations to engage in M&A activity and the increased likelihood that, as an IT leader, you will be involved in a transaction in your career.
  • Creating a standard strategy that will enable strong program management.
  • Properly considering all the critical components of the transaction and integration by prioritizing tasks that will reduce risk, deliver value, and meet stakeholder expectations.

Mergers & Acquisitions: The Sell Blueprint Research & Tools

Start here – read the Executive Brief

Read our concise Executive Brief to find out how your organization can excel its reduction strategy by engaging in M&A transactions. Review Info-Tech’s methodology, and understand the four ways we can support you in completing this project.

2. Discovery & Strategy

Create a standardized approach for how your IT organization should address divestitures or sales.

4. Execution & Value Realization

Deliver on the separation project plan successfully and communicate IT’s transaction value to the business.


Mergers & Acquisitions: The Sell Blueprint

For IT leaders who want to have a role in the transaction process when their business is engaging in an M&A sale or divestiture.

EXECUTIVE BRIEF

Analyst Perspective

Don’t wait to be invited to the M&A table, make it.

Photo of Brittany Lutes, Research Analyst, CIO Practice, Info-Tech Research Group.
Brittany Lutes
Research Analyst,
CIO Practice
Info-Tech Research Group
Photo of Ibrahim Abdel-Kader, Research Analyst, CIO Practice, Info-Tech Research Group.
Ibrahim Abdel-Kader
Research Analyst,
CIO Practice
Info-Tech Research Group

IT has always been an afterthought in the M&A process, often brought in last minute once the deal is nearly, if not completely, solidified. This is a mistake. When IT is brought into the process late, the business misses opportunities to generate value related to the transaction and has less awareness of critical risks or inaccuracies.

To prevent this mistake, IT leadership needs to develop strong business relationships and gain respect for their innovative suggestions. In fact, when it comes to modern M&A activity, IT should be the ones suggesting potential transactions to meet business needs, specifically when it comes to modernizing the business or adopting digital capabilities.

IT needs to stop waiting to be invited to the acquisition or divestiture table. IT needs to suggest that the table be constructed and actively work toward achieving the strategic objectives of the business.

Executive Summary

Your Challenge

There are four key scenarios or entry points for IT as the selling/divesting organization in M&As:

  • IT can suggest a divestiture to meet the business objectives of the organization.
  • IT is brought in to strategy plan the sale/divestiture from both the business’ and IT’s perspectives.
  • IT participates in due diligence activities and complies with the purchasing organization’s asks.
  • IT needs to reactively prepare its environment to enable the separation.

Consider the ideal scenario for your IT organization.

Common Obstacles

Some of the obstacles IT faces include:

  • IT is often told about the transaction once the deal has already been solidified and is now forced to meet unrealistic business demands.
  • The business does not trust IT and therefore does not approach IT to define value or reduce risks to the transaction process.
  • The people and culture element is forgotten or not given adequate priority.

These obstacles often arise when IT waits to be invited into the transaction process and misses critical opportunities.

Info-Tech's Approach

Prepare for a sale/divestiture transaction by:

  • Recognizing the trend for organizations to engage in M&A activity and the increased likelihood that, as an IT leader, you will be involved in a transaction in your career.
  • Creating a standard strategy that will enable strong program management.
  • Properly considering all the critical components of the transaction and integration by prioritizing tasks that will reduce risk, deliver value, and meet stakeholder expectations.

Info-Tech Insight

As the number of merger, acquisition, and divestiture transactions continues to increase, so too does IT’s opportunity to leverage the growing digital nature of these transactions and get involved at the onset.

The changing M&A landscape

Businesses will embrace more digital M&A transactions in the post-pandemic world

  • When the pandemic occurred, businesses reacted by either pausing (61%) or completely cancelling (46%) deals that were in the mid-transaction state (Deloitte, 2020). The uncertainty made many organizations consider whether the risks would be worth the potential benefits.
  • However, many organizations quickly realized the pandemic is not a hindrance to M&A transactions but an opportunity. Over 16,000 American companies were involved in M&A transactions in the first six months of 2021 (The Economist). For reference, this had been averaging around 10,000 per six months from 2016 to 2020.
  • In addition to this transaction growth, organizations have increasingly been embracing digital. These trends increase the likelihood that, as an IT leader, you will engage in an M&A transaction. However, it is up to you when you get involved in the transactions.

The total value of transactions in the year after the pandemic started was $1.3 billion – a 93% increase in value compared to before the pandemic. (Nasdaq)

71% of technology companies anticipate that divestitures will take place as a result of the COVID-19 pandemic. (EY, 2020)

Your challenge

IT is often not involved in the M&A transaction process. When it is, it’s often too late.

  • The most important driver of an acquisition is the ability to access new technology (DLA Piper), and yet 50% of the time, IT isn’t involved in the M&A transaction at all (IMAA Institute, 2017).
  • Additionally, IT’s lack of involvement in the process negatively impacts the business:
    • Most organizations (60%) do not have a standardized approach to integration (Steeves and Associates), let alone separation.
    • Two-thirds of the time, the divesting organization and acquiring organization will either fail together or succeed together (McKinsey, 2015).
    • Less than half (47%) of organizations actually experience the positive results sought by the M&A transaction (Steeves and Associates).
  • Organizations pursuing M&A and not involving IT are setting themselves up for failure.

Only half of M&A deals involve IT (Source: IMAA Institute, 2017)

Common Obstacles

These barriers make this challenge difficult to address for many organizations:

  • IT is rarely afforded the opportunity to participate in the transaction deal. When IT is invited, this often happens later in the process where separation will be critical to business continuity.
  • IT has not had the opportunity to demonstrate that it is a valuable business partner in other business initiatives.
  • One of the most critical elements that IT often doesn’t take the time or doesn’t have the time to focus on is the people and leadership component.
  • IT waits to be invited to the process rather then actively involving themselves and suggesting how value can be added to the process.

In hindsight, it’s clear to see: Involving IT is just good business.

47% of senior leaders wish they would have spent more time on IT due diligence to prevent value erosion. (Source: IMAA Institute, 2017)

“Solutions exist that can save well above 50 percent on divestiture costs, while ensuring on-time delivery.” (Source: SNP)

Info-Tech's approach

Acquisitions & Divestitures Framework

Acquisitions and divestitures are inevitable in modern business, and IT’s involvement in the process should be too. This progression is inspired by:

  1. The growing trend for organizations to increase, decrease, or evolve through these types of transactions.
  2. Transactions that are driven by digital motivations, requiring IT’s expertise.
  3. A maturing business perspective of IT, preventing the difficulty that IT is faced with when invited into the transaction process late.
  4. There never being such a thing as a true merger, making the majority of M&A activity either acquisitions or divestitures.
A diagram highlighting the 'IT Executives' Role in Acquisitions and Divestitures' when they are integrated at different points in the 'Core Business Timeline'. There are four main entry points 'Proactive', 'Discovery and Strategy', 'Due Diligence and Preparation', and 'Execution and Value Realized'. It is highlighted that IT can and should start at 'Proactive', but most organizations start at 'Execution and Value Realized'. 'Proactive': suggest opportunities to evolve the organization; prove IT's value and engage in growth opportunities early. Innovators start here. Steps of the business timeline in 'Proactive' are 'Organization strategies are defined' and 'M and A is considered to enable strategy'. After a buy or sell transaction is initiated is 'Discovery and Strategy': pre-transaction state. If it is a Buy transaction, 'Establish IT's involvement and approach'. If it is a Sell transaction, 'Prepare to engage in negotiations'. Business Partners start here. Steps of the business timeline in 'Discovery and Strategy' are 'Searching criteria is set', 'Potential candidates are considered', and 'LOI is sent/received'. 'Due Diligence and Preparation': mid-transaction state. If it is a Buy transaction, 'Identify potential transaction benefits and risks'. If it is a Sell transaction, 'Comply, communicate, and collaborate in transaction'. Trusted Operators start here. Steps of the business timeline in 'Due Diligence and Preparation' are 'Due diligence engagement occurs', 'Final agreement is reached', and 'Preparation for transaction execution occurs'. 'Execution and Value Realization': post-transaction state. If it is a Buy transaction, 'Integrate the IT environments and achieve business value'. If it is a Sell transaction, 'Separate the IT environment and deliver on transaction terms'. Firefighters start here. Steps of the business timeline in 'Execution and Value Realization' are 'Staff and operations are addressed appropriately', 'Day 1 of implementation and integration activities occurs', '1st 100 days of new entity state occur' and 'Ongoing risk mitigating and value creating activities occur'.

The business’ view of IT will impact how soon IT can get involved

There are four key entry points for IT

A colorful visualization of the four key entry points for IT and a fifth not-so-key entry point. Starting from the top: 'Innovator', Information and Technology as a Competitive Advantage, 90% Satisfaction; 'Business Partner', Effective Delivery of Strategic Business Projects, 80% Satisfaction; 'Trusted Operator', Enablement of Business Through Application and Work Orders, 70% Satisfaction; 'Firefighter', Reliable Infrastructure and IT Service Desk, 60% Satisfaction; and then 'Unstable', Inability to Consistently Deliver Basic Services, <60% Satisfaction.
  1. Innovator: IT suggests a sale or divestiture to meet the business objectives of the organization.
  2. Business Partner: IT is brought in to strategy plan the sale/divestiture from both the business’ and IT’s perspective.
  3. Trusted Operator: IT participates in due diligence activities and complies with the purchasing organization’s asks.
  4. Firefighter: IT needs to reactively prepare its environment in order to enable the separation.

Merger, acquisition, and divestiture defined

Merger

A merger looks at the equal combination of two entities or organizations. Mergers are rare in the M&A space, as the organizations will combine assets and services in a completely equal 50/50 split. Two organizations may also choose to divest business entities and merge as a new company.

Acquisition

The most common transaction in the M&A space, where an organization will acquire or purchase another organization or entities of another organization. This type of transaction has a clear owner who will be able to make legal decisions regarding the acquired organization.

Divestiture

An organization may decide to sell partial elements of a business to an acquiring organization. They will separate this business entity from the rest of the organization and continue to operate the other components of the business.

Info-Tech Insight

A true merger does not exist, as there is always someone initiating the discussion. As a result, most M&A activity falls into acquisition or divestiture categories.

Selling vs. buying

The M&A process approach differs depending on whether you are the selling or buying organization

This blueprint is only focused on the sell side:

  • Examples of sell-related scenarios include:
    • Your organization is selling to another organization with the intent of keeping its regular staff, operations, and location. This could mean minimal separation is required.
    • Your organization is selling to another organization with the intent of separating to be a part of the purchasing organization.
    • Your organization is engaging in a divestiture with the intent of:
      • Separating components to be part of the purchasing organization permanently.
      • Separating components to be part of a spinoff and establish a unit as a standalone new company.
  • As the selling organization, you could proactively seek out suitors to purchase all or components of your organization, or you could be approached by an organization.

The buy side is focused on:

  • More than two organizations could be involved in a transaction.
  • Examples of buy-related scenarios include:
    • Your organization is buying another organization with the intent of having the purchased organization keep its regular staff, operations, and location. This could mean minimal integration is required.
    • Your organization is buying another organization in its entirety with the intent of integrating it into your original company.
    • Your organization is buying components of another organization with the intent of integrating them into your original company.
  • As the purchasing organization, you will probably be initiating the purchase and thus will be valuating the selling organization during due diligence and leading the execution plan.

For more information on acquisitions or purchases, check out Info-Tech’s Mergers & Acquisitions: The Buy Blueprint.

Core business timeline

For IT to be valuable in M&As, you need to align your deliverables and your support to the key activities the business and investors are working on.

Info-Tech’s methodology for Selling Organizations in Mergers, Acquisitions, or Divestitures

1. Proactive

2. Discovery & Strategy

3. Due Diligence & Preparation

4. Execution & Value Realization

Phase Steps

  1. Identify Stakeholders and Their Perspective of IT
  2. Assess IT’s Current Value and Future State
  3. Drive Innovation and Suggest Growth Opportunities
  1. Establish the M&A Program Plan
  2. Prepare IT to Engage in the Separation or Sale
  1. Engage in Due Diligence and Prepare Staff
  2. Prepare to Separate
  1. Execute the Transaction
  2. Reflection and Value Realization

Phase Outcomes

Be an innovative IT leader by suggesting how and why the business should engage in an acquisition or divestiture.

Create a standardized approach for how your IT organization should address divestitures or sales.

Comply with due diligence, prepare the IT environment for carve-out possibilities, and establish the separation project plan.

Deliver on the separation project plan successfully and communicate IT’s transaction value to the business.

Metrics for each phase

1. Proactive

2. Discovery & Strategy

3. Valuation & Due Diligence

4. Execution & Value Realization

  • % Share of business innovation spend from overall IT budget
  • % Critical processes with approved performance goals and metrics
  • % IT initiatives that meet or exceed value expectation defined in business case
  • % IT initiatives aligned with organizational strategic direction
  • % Satisfaction with IT's strategic decision-making abilities
  • $ Estimated business value added through IT-enabled innovation
  • % Overall stakeholder satisfaction with IT
  • % Percent of business leaders that view IT as an Innovator
  • % IT budget as a percent of revenue
  • % Assets that are not allocated
  • % Unallocated software licenses
  • # Obsolete assets
  • % IT spend that can be attributed to the business (chargeback or showback)
  • % Share of CapEx of overall IT budget
  • % Prospective organizations that meet the search criteria
  • $ Total IT cost of ownership (before and after M&A, before and after rationalization)
  • % Business leaders that view IT as a Business Partner
  • % Defects discovered in production
  • $ Cost per user for enterprise applications
  • % In-house-built applications vs. enterprise applications
  • % Owners identified for all data domains
  • # IT staff asked to participate in due diligence
  • Change to due diligence
  • IT budget variance
  • Synergy target
  • % Satisfaction with the effectiveness of IT capabilities
  • % Overall end-customer satisfaction
  • $ Impact of vendor SLA breaches
  • $ Savings through cost-optimization efforts
  • $ Savings through application rationalization and technology standardization
  • # Key positions empty
  • % Frequency of staff turnover
  • % Emergency changes
  • # Hours of unplanned downtime
  • % Releases that cause downtime
  • % Incidents with identified problem record
  • % Problems with identified root cause
  • # Days from problem identification to root cause fix
  • % Projects that consider IT risk
  • % Incidents due to issues not addressed in the security plan
  • # Average vulnerability remediation time
  • % Application budget spent on new build/buy vs. maintenance (deferred feature implementation, enhancements, bug fixes)
  • # Time (days) to value realization
  • % Projects that realized planned benefits
  • $ IT operational savings and cost reductions that are related to synergies/divestitures
  • % IT staff–related expenses/redundancies
  • # Days spent on IT separation
  • $ Accurate IT budget estimates
  • % Revenue growth directly tied to IT delivery
  • % Profit margin growth

IT's role in the selling transaction

And IT leaders have a greater likelihood than ever of needing to support a merger, acquisition, or divestiture.

  1. Reduced Risk

    IT can identify risks that may go unnoticed when IT is not involved.
  2. Increased Accuracy

    The business can make accurate predictions around the costs, timelines, and needs of IT.
  3. Faster Integration

    Faster integration means faster value realization for the business.
  4. Informed Decision Making

    IT leaders hold critical information that can support the business in moving the transaction forward.
  5. Innovation

    IT can suggest new opportunities to generate revenue, optimize processes, or reduce inefficiencies.

The IT executive’s critical role is demonstrated by:

  • Reduced Risk

    47% of senior leaders wish they would have spent more time on IT due diligence to prevent value erosion (IMAA Institute, 2017).
  • Increased Accuracy

    Sellers often only provide 15 to 30 days for the acquiring organization to decide (Forbes, 2018), increasing the necessity of accurate pricing.
  • Faster Integration

    36% of CIOs have visibility into only business unit data, making the divestment a challenge (EY, 2021).
  • Informed Decision Making

    Only 38% of corporate and 22% of private equity firms include IT as a significant aspect in their transaction approach (IMAA Institute, 2017).
  • Innovation

    Successful CIOs involved in M&As can spend 70% of their time on aspects outside of IT and 30% of their time on technology and delivery (CIO).

Playbook benefits

IT Benefits

  • IT will be seen as an innovative partner to the business, and its suggestions and involvement in the organization will lead to benefits, not hindrances.
  • Develop a streamlined method to prepare the IT environment for potential carve-out and separations, ensuring risk management concerns are brought to the business’ attention immediately.
  • Create a comprehensive list of items that IT needs to do during the separation that can be prioritized and actioned.

Business Benefits

  • The business will get accurate and relevant information about its IT environment in order to sell or divest the company to the highest bidder for a true price.
  • Fewer business interruptions will happen, because IT can accurately plan for and execute the high-priority separation tasks.
  • The business can obtain a high-value offer for the components of IT being sold and can measure the ongoing value the sale will bring.

Insight summary

Overarching Insight

IT controls if and when it gets invited to support the business through a purchasing growth transaction. Take control of the process, demonstrate the value of IT, and ensure that separation of IT environments does not lead to unnecessary and costly decisions.

Proactive Insight

CIOs on the forefront of digital transformation need to actively look for and suggest opportunities to acquire or partner on new digital capabilities to respond to rapidly changing business needs.

Discovery & Strategy Insight

IT organizations that have an effective M&A program plan are more prepared for the transaction, enabling a successful outcome. A structured strategy is particularly necessary for organizations expected to deliver M&As rapidly and frequently.

Due Diligence & Preparation Insight

IT often faces unnecessary separation challenges because of a lack of preparation. Secure the IT environment and establish how IT will retain employees early in the transaction process.

Execution & Value Realization Insight

IT needs to demonstrate value and cost savings within 100 days of the transaction. The most successful transactions are when IT continuously realizes synergies a year after the transaction and beyond.

Blueprint deliverables

Key Deliverable: M&A Sell Playbook

The M&A Sell Playbook should be a reusable document that enables your IT organization to successfully deliver on any divestiture transaction.

Screenshots of the 'M and A Sell Playbook' deliverable.

M&A Sell One-Pager

See a one-page overview of each phase of the transaction.

Screenshots of the 'M and A Sell One-Pagers' deliverable.

M&A Sell Case Studies

Read a one-page case study for each phase of the transaction.

Screenshots of the 'M and A Sell Case Studies' deliverable.

M&A Separation Project Management Tool (SharePoint)

Manage the separation process of the divestiture/sale using this SharePoint template.

Screenshots of the 'M and A Separation Project Management Tool (SharePoint)' deliverable.

M&A Separation Project Management Tool (Excel)

Manage the separation process of the divestiture/sale using this Excel tool if you can’t or don’t want to use SharePoint.

Screenshots of the 'M and A Separation Project Management Tool (Excel)' deliverable.

Info-Tech offers various levels of support to best suit your needs

DIY Toolkit

Guided Implementation

Workshop

Consulting

"Our team has already made this critical project a priority, and we have the time and capability, but some guidance along the way would be helpful." "Our team knows that we need to fix a process, but we need assistance to determine where to focus. Some check-ins along the way would help keep us on track." "We need to hit the ground running and get this project kicked off immediately. Our team has the ability to take this over once we get a framework and strategy in place." "Our team does not have the time or the knowledge to take this project on. We need assistance through the entirety of this project."

Diagnostics and consistent frameworks used throughout all four options

Guided Implementation

What does a typical GI on this topic look like?

A Guided Implementation (GI) is a series of calls with an Info-Tech analyst to help implement our best practices in your organization.

A typical GI is between 6 to 10 calls over the course of 2 to 4 months.

    Proactive Phase

  • Call #1: Scope requirements, objectives, and your specific challenges.
  • Discovery & Strategy Phase

  • Call #2: Determine stakeholders and business perspectives on IT.
  • Call #3: Identify how M&A could support business strategy and how to communicate.
  • Due Diligence & Preparation Phase

  • Call #4: Establish a transaction team and divestiture/sale strategic direction.
  • Call #5: Create program metrics and identify a standard separation strategy.
  • Call #6: Prepare to carve out the IT environment.
  • Call #7: Identify the separation program plan.
  • Execution & Value Realization Phase

  • Call #8: Establish employee transitions to retain key staff.
  • Call #9: Assess IT’s ability to deliver on the divestiture/sale transaction.

For IT leaders who want to have a role in the transaction process when their business is engaging in an M&A sale or divestiture.

About Info-Tech

Info-Tech Research Group is the world’s fastest-growing information technology research and advisory company, proudly serving over 30,000 IT professionals.

We produce unbiased and highly relevant research to help CIOs and IT leaders make strategic, timely, and well-informed decisions. We partner closely with IT teams to provide everything they need, from actionable tools to analyst guidance, ensuring they deliver measurable results for their organizations.

What Is a Blueprint?

A blueprint is designed to be a roadmap, containing a methodology and the tools and templates you need to solve your IT problems.

Each blueprint can be accompanied by a Guided Implementation that provides you access to our world-class analysts to help you get through the project.

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Guided Implementation 1: Proactive Phase
  • Call 1: Scope requirements, objectives, and your specific challenges.
  • Call 2: Determine stakeholders and business perspectives on IT.
  • Call 3: Identify how M&A could support business strategy and how to communicate.

Guided Implementation 2: Discovery & Strategy Phase
  • Call 1: Establish a transaction team and divestiture/sale strategic direction.
  • Call 2: Create program metrics and identify a standard separation strategy.

Guided Implementation 3: Due Diligence & Preparation Phase
  • Call 1: Prepare to carve out the IT environment.
  • Call 2: Identify the separation program plan

Guided Implementation 4: Execution & Value Realization Phase
  • Call 1: Establish employee transitions to retain key staff.
  • Call 2: Assess IT’s ability to deliver on the divestiture/sale transaction.

Authors

Ibrahim Abdel-Kader

Brittany Lutes

Contributors

  • Eric Dolinar, Manager, M&A Consulting, Deloitte Canada
  • Christoph Egel, Director, Solution Design & Deliver, Cooper Tire & Rubber Company
  • David Glazer, Vice President of Analytics, Kroll
  • Nancy McCuaig, Senior Vice President, Chief Technology and Data Office, IGM Financial Inc.
  • Nayma Naser, Associate, Deloitte
  • Mark Rosa, Senior Vice President & Chief Information Officer, Mohegan Gaming and Entertainment
  • Jim Robson, Senior Vice President (retired), Share Enterprise Services, Great-West Life
  • Nikki Seventikidis, Senior Manager, Finance Initiative & Continuous Improvement, CST Consultants Inc.
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