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Intertwined

Often overlooked, information-technology integration plans can make or break mergers and acquisitions.

As the CFO of Dassault Systemes, Thibault de Tersant knows a thing or two about integration. After all, a big part of the product lifecycle management (PLM) software applications that the €1.2 billion French company sells helps its corporate customers “see the whole life of a product,” he says. “To do that, you need to integrate what you do in design with what you do in manufacturing with what you do in post-sales maintenance with what you do in product testing and so on, and there needs to be an integration layer sitting on top of all these applications.”

This is a useful insight for de Tersant, who also applies some of those PLM principles to the 20 or so acquisitions that he’s been a part of since Dassault’s IPO in 1999. “Since we developed this PLM software [in the late 1990s], it’s not only helped us grow our revenue, but also helped us quite a lot in acquisitions,” says the CFO, who was put in charge of IT last year. That explains why every company acquired by Dassault has been required to adopt the parent company’s portfolio of software tools used for PLM product development. If they didn’t do it this way, “we would have had a bunch of heterogeneous applications and it would have been a nightmare,” he notes.

The importance of IT integration following a merger or acquisition isn’t lost on other finance chiefs. “More and more CFOs are at least aware of the importance of IT in a merger,” says Bruno Berthon, a Paris-based partner at Accenture. “But the major handicap is still the starting point — if you have processes that are well defined, you’ll be entering into integration with a sound logic. But processes aren’t well defined at most companies so a merger is just adding complexity to an already complex element of corporate life.”

Digesting Deals

That’s not good news for deal makers, especially since the record-setting pace of M&A activity is creating pressure to capture the benefits of takeovers sooner rather than later. While CEOs and CFOs “have figured out that there are savings in IT, I think they have no clue where they are,” contends Berthon. “And so in that sense the dialogue is not completely efficient in the ability of the CFO or CEO to understand how to drive IT to both support integration and to provide savings.”

The synergies and resulting savings can indeed be significant. Consultancy Ovum estimates that IT can account for as much as 30% to 50% of post-merger savings at some companies, with software accounting for between 25% and 40% of those savings. Those savings come in areas ranging from the consolidation of data centres and streamlining of IT procurement through to thornier, more time-consuming standardisation of hardware and networks.

Critical to achieving significant post-merger benefits in IT is the strength of the integration plan. Gary Barnett, research director of Ovum, says there are two extreme routes companies can take — “one is the softly, softly approach, which lets the two merging entities run systems concurrently for a while and then see which works best; the other is what I call the Stalinist approach, which says, We’re moving to this system, and all other systems will be switched off in six months.” While there’s no one-size-fits-all approach, he says, “I have a slight preference for the Stalinist approach. Even if it might mean you’re throwing away some good things, it doesn’t leave any room for political in-fighting.”

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