Editor’s note: Keith M. Chiavetta is a Senior Manager, Business Advisory Services, with Grant Thornton LLP.
As the merger & acquisition (M &A) market continues to heat up, many companies in the technology sector have entered into M&A transactions or are contemplating doing so in the near future. With this in mind, technology companies should know that in order for a transaction to be successful, acquisition integration efforts must begin early — ideally during due diligence.
“The level of planning during the due diligence process can largely predict the level of success of an integration. Determining the critical success factors, risks and issues will enable the development of a roadmap for smoother integration of the acquisition,” says Keith Chiavetta, Grant Thornton business advisory services senior manager.
According to Chiavetta, technology companies must take into account the enormity and complexity of integrating two completely different companies and cultures during the due diligence process — all while operating in a “business as usual” environment. Of the many processes and procedures for companies to review during due diligence, there are a few areas that companies should pay particular attention to:
The integration of multiple IT systems can be one of the most difficult and time consuming challenges of a merger, considering hardware and software can be outsourced, homegrown or a combination of both, leading to the challenge of not only integrating the data found in multiple systems, but also ensuring that the appropriate controls are in place to ensure data integrity.
Dedicated Project Management
A merger integration project plan and prioritization of activities is often useless without the development of a dedicated internal project team (ideally drawn from all segments of the company) to help carry out the plan, making sure the entire company stays on track by promoting efficient workstreams and processes and improving communications to all affected parties.
Policies and Procedures
When entering a merger, the assessment of human resource, compensation and benefit policies and procedures — such as bonuses, paid time off and business contracts — is often underestimated, resulting in difficulties down the road. To avoid this issue, companies should look closely at these policies and procedures and their integration into the combined company. Often companies can’t effectively determine which policies and procedures are optimal.
Effective Communication Planning
A significant amount of merger communication planning and roll-out to employees, clients and relevant third-parties is integral to merger success, boosting employee moral and helping to ensure that resources and information are being received and understood by all effected parties.
Because of the time and energy required to adequately complete the merger process, several accounting and consulting firms offer technology companies the option of merger integration services, providing additional expertise and insight.
“A lot of companies think they can do it themselves, but that person or team may not be able to see things holistically,” says Chiavetta. “By utilizing an outside team, companies can benefit from the objectivity needed to determine potential issues and risks, as well as potential business drivers and benefits of the merger.”
As noted by Chiavetta, the results of such services can be measurable, including:
A roadmap leveraging the knowledge gained through the integration process — giving you greater confidence and knowledge to successfully operate your new company long-term
“In the end, merger integration assistance can help to not only reduce costs and eliminate duplicative efforts, but to also provide the client with greater confidence and knowledge to successfully operate their new company long term,” says Chiavetta.
Chiavetta is a frequent speaker on the topic of merger integration, most recently presenting at the American Electronics Association’s Midwest Council Executive Forum on Sept. 27, 2005. To learn more about Grant Thornton’s merger integration services, please contact Keith at Keith.Chiavetta@gt.com
This Grant Thornton LLP Update provides information and comments on current accounting issues and developments. It is not a comprehensive analysis of the subject matter covered and is not intended to provide accounting advice. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at accounting that complies with matters addressed in this Update.