CIO Roundtable: The healthcare Pac-Man game continues: How to get IT integration right after an M&A transaction

Still waiting for your seat at the M&A table?

Mergers and acquisitions continue to play a dramatic role in the Healthcare Industry today. Unfortunately, IT is frequently an afterthought in the M&A process, often brought in at the last minute once the deal is nearly done. The result is missed opportunities to generate value, a lack of awareness of critical risks or inaccuracies, and preventable integration challenges.

IT expertise can help the business get it right

• When it comes to modern M&A activity, IT shouldn’t be late to the party.
• CIOs can add value from the outset, with insight into potential transactions to meet business needs, specifically when it comes to modernizing the business or adopting digital capabilities.
• IT leadership needs to develop strong business relationships and gain respect and credibility for their innovative suggestions.

Add IT’s voice to the M&A discussion

Join a roundtable of experts for an insightful talk on IT’s role in Healthcare M&A activities:

• Discuss how IT leadership can develop strong business relationships and gain respect for innovative suggestions.
• Learn why IT should be the ones suggesting potential transactions when it comes to modernizing the business or adopting digital capabilities.
• Understand how IT can have a seat at the acquisition/divestiture table and actively work toward achieving the strategic objectives of the business.

IT has always been an afterthought in the M&A process, often brought in at the 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 from 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.

Your Challenge

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

• IT can suggest an acquisition to meet the business objectives of the organization.
• IT is brought in to strategically plan the acquisition from both the business’ and IT’s perspectives.
• IT participates in due diligence activities and valuates the organization potentially being acquired.
• IT needs to reactively prepare its environment to enable the integration.

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 growth/integration 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

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).

When the pandemic occurred, businesses reacted by either pausing (61%) or completely canceling (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.

Virtual deal-making will be the preferred method of 55% of organizations in the post-pandemic world (Wall Street Journal, 2020).

Integration strategies

There are several IT integration strategies that will help you achieve your target technology environment.

IT Integration Strategies

Absorption

Convert the target organization’s strategy, structure, processes, and/or systems to that of the acquiring organization.

Best of Breed

Pick and choose the most effective people, processes, and technologies to form an efficient operating model.

Transformation

Retire systems from both organizations and use collective capabilities, data, and processes to create something entirely new.

Preservation

Retain individual business units that will operate within their own capability. People, processes, and technologies are unchanged.

The approach IT takes will depend on the business objectives for the M&A.

• Generally speaking, the integration strategy is well understood and influenced by the frequency of and rationale for acquiring.
• Based on the initiatives generated by each business process owner, you need to determine the IT integration strategy that will best support the desired target technology environment.

Key considerations when choosing an IT integration strategy include:

• What are the main business objectives of the M&A?
• What are the key synergies expected from the transaction?
• What IT integration best helps obtain these benefits?
• What opportunities exist to position the business for sustainable growth?

Info-Tech’s 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.