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How can you manage IT consulting risks during mergers and acquisitions?

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Mergers and acquisitions (M&A) are complex and challenging processes that involve multiple stakeholders, legal and financial issues, and strategic decisions. IT consulting is a vital part of any M&A deal, as it helps to assess, integrate, and optimize the IT systems and capabilities of the merging or acquiring entities. However, IT consulting also comes with various risks that need to be managed carefully to ensure a successful outcome. In this article, we will discuss some of the common IT consulting risks during M&A and how you can mitigate them.

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Bruce Eckert

Healthcare IT consulting / M&A / Big 4 Advisory / Univ of Chicago / MBA

1 Risk assessment

Before engaging in any IT consulting project for M&A, you need to conduct a thorough risk assessment of the current and future IT environment of the involved parties. This includes identifying the IT assets, infrastructure, applications, data, security, compliance, and governance aspects of each entity and how they align or differ from each other. You also need to evaluate the potential impact of the M&A on the IT performance, functionality, availability, and scalability. A risk assessment will help you to prioritize the most critical and urgent IT issues and plan for the appropriate solutions and resources.

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Bruce Eckert

Healthcare IT consulting / M&A / Big 4 Advisory / Univ of Chicago / MBA
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The first step in mitigating IT-related M&A risks is the up-front due diligence report. IT should be included the pre-sign diligence efforts in order to identify IT-related financial, legal, and compliance risks that may impact the valuation. The IT due diligence report should also provide an objective view of the target IT environment that will allow the acquirer to begin evaluating IT integration options.

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2 Integration strategy

One of the main goals of IT consulting during M&A is to integrate the IT systems and processes of the merging or acquiring entities in a seamless and efficient way. This requires a clear and coherent integration strategy that defines the scope, timeline, budget, roles, responsibilities, and deliverables of the IT consulting project. An integration strategy should also address the technical, organizational, and cultural challenges that may arise during the integration process, such as data migration, system compatibility, process alignment, change management, and stakeholder communication. An integration strategy will help you to avoid duplication, inconsistency, and confusion in the IT environment and ensure a smooth transition.

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Bruce Eckert

Healthcare IT consulting / M&A / Big 4 Advisory / Univ of Chicago / MBA
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When developing an IT integration strategy, several factors need to be taken into consideration. First, is the integration strategies being pursued by the operational workstreams - IT's integration strategy needs to support these operational requirements. Second is the similarity/dissimilarity of the organizations' information requirements. For example, if the acquirer and target operate in distinct geographic regions - say, separate countries - the information processing requirements may highly be highly divergent. And, finally, the enterprise's exit plan for the acquired target needs to be considered. If the target may be spun off or IPO'd at some point it may be wise to maintain some level of IT independence.

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3 Quality assurance

Another important aspect of IT consulting during M&A is to ensure the quality and reliability of the IT systems and processes after the integration. This involves conducting regular and rigorous quality assurance (QA) tests and audits to verify the functionality, performance, security, and compliance of the integrated IT environment. QA tests and audits should cover the technical, operational, and business aspects of the IT systems and processes, such as data quality, system availability, user satisfaction, and business outcomes. QA tests and audits will help you to identify and resolve any errors, defects, or gaps in the IT environment and ensure a high level of customer service and value.

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4 Risk mitigation

Despite the best efforts and planning, IT consulting during M&A may still encounter some unexpected or unforeseen risks that could jeopardize the success of the project. These risks could be related to the technical, operational, or strategic aspects of the IT environment, such as system failures, data breaches, regulatory changes, or stakeholder conflicts. To mitigate these risks, you need to have a proactive and flexible risk mitigation plan that outlines the potential scenarios, impacts, and responses for each risk. A risk mitigation plan should also include the contingency measures, backup systems, and recovery procedures in case of any emergency or crisis. A risk mitigation plan will help you to reduce the likelihood and severity of the risks and minimize the disruption and damage to the IT environment and the business.

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Bruce Eckert

Healthcare IT consulting / M&A / Big 4 Advisory / Univ of Chicago / MBA
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IT integrations or separations as a result of M&A activity inevitably increase the cybersecurity threat exposure of the buyer, the target and the seller - as all involved entities share each other's vulnerabilities to some extent. And, until full integration is achieved, security governance, incident management and event management are all fragmented to some degree. While this cannot be fully avoided, it can - and should - be mitigated by agreeing to a shared security governance and oversight approach, and a single set of security controls before beginning the IT integration effort.

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5 Continuous improvement

Finally, IT consulting during M&A is not a one-time or static project, but a dynamic and ongoing process that requires continuous improvement and adaptation. As the IT environment and the business needs evolve and change over time, you need to monitor, evaluate, and optimize the IT systems and processes to ensure their alignment and effectiveness. This involves collecting and analyzing the feedback, data, and metrics from the IT environment and the business stakeholders and using them to identify the strengths, weaknesses, opportunities, and threats of the IT environment. You also need to implement the necessary changes, enhancements, and innovations to the IT systems and processes to improve their quality, performance, security, and compliance. Continuous improvement will help you to maintain and increase the IT value and competitiveness of the merged or acquired entity.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Bruce Eckert

Healthcare IT consulting / M&A / Big 4 Advisory / Univ of Chicago / MBA
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Frequently, some IT synergies are factored into the deal thesis. But, often these cost savings are not realized. IT leadership is involved in developing the synergy targets or not, IT leadership - and those involved in executing the integration - need to be aware of the IT synergy targets, and build achievement of them into the IT integration plan. It is rarely the case that IT synergies simply "show up" as a by-product of integration.

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How can you manage IT consulting risks during mergers and acquisitions?

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1 Risk assessment

2 Integration strategy

3 Quality assurance

4 Risk mitigation

5 Continuous improvement

6 Here’s what else to consider

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