Why, and when, CIOs deserve a seat at the M&A negotiating table

When
one
company
acquires
another,
it’s
typically
to
enter
a
new
market,
gain
market
share,
or
obtain
a
new
technology.
In
all
three
cases,
IT
systems
and
the
data
they
hold
are
crucial
to
the
realization
of
those
goals.

[…]

Why, and when, CIOs deserve a seat at the M&A negotiating table

When
one
company
acquires
another,
it’s
typically
to
enter
a
new
market,
gain
market
share,
or
obtain
a
new
technology.
In
all
three
cases,
IT
systems
and
the
data
they
hold
are
crucial
to
the
realization
of
those
goals.

“The
biggest
mistake
most
companies
make
when
they’re
looking
at
deals
is
they
tend
to
minimize
the
investments
necessary
to
bring
the
organizations
together
and
drive
costs
out
of
the
IT
function
to
get
those
synergies,”
says
Mike
Macrie,
CIO
of
toy
maker
Melissa
and
Doug,
who
had
to
integrate
a
number
of
acquisitions
in
a
previous
role.

The
key
to
ensuring
success
in
such
deals
is
for
the
IT
team
to
identify
the
challenges
up
front,
says
Lars
Ewe,
CIO
at
industrial
data
services
company
DTN.

“I
know
that
sounds
so
‘duh,’
but
often
people
make
acquisitions
and
only
then
realize
what
they
bought,
technology-wise,”
he
says.

Sudheesh
Nair,
CEO
of
ThoughtSpot,
says
that
companies
exclude
IT
leaders
from
negotiations
at
their
peril.

“If
the
CIO
isn’t
involved,
at
least
in
the
early
phases,
the
ideas
you
have
in
terms
of
how
long
it’s
going
to
take
to
bring
them
together,
how
long
it
is
going
to
take
to
modernize—all
of
those
calculations
could
be
really
off,”
he
says.

Despite
the
importance
of
involving
CIOs,
just
24%
of
organizations
included
them
in
pre-merger
planning,
with
an
alarming
number
of
IT
leaders
learning
from
the
press
that
their
company
made
an
acquisition,
according
to
a
2015
academic
study
of
the
role
CIOs
play
in
M&A
successes.

Nair
says
he
understands
why
some
CEOs
would
want
to
limit
those
in
the
know:
“M&As
are
so
messy
and
sensitive
that
you
want
to
keep
the
number
of
people
involved
really
small.
Any
sort
of
leak
is
only
going
to
cause
the
M&A
to
go
sideways,
or
increase
the
price.”
But,
he
says,
“There’s
no
excuse
for
CIOs
not
to
be
in
that
room
anymore.”

Despite
that,
many
CIOs
are
still
shut
out
of
negotiations.
Ewe
is
one
of
them,
although
he’s
found
a
way
to
influence
the
discussion,
providing
those
on
the
inside
with
a
due-diligence
checklist
for
technology.

“If
you’re
not
part
of
the
process,
then
you’re
at
least
represented
through
a
mechanism
by
which
you
say,
‘Get
through
this
checklist
and
then
I
can
provide
you
an
assessment
of
the
cost
of
integration,’”
he
says.

Questions
for
the
CEO

Ewe
is
not
the
only
one
with
a
checklist:
Kevin
Hunt,
CIO
of
Spirit
AeroSystems,
has
one
too,
covering
topics
such
as
the
age
of
the
target
company’s
infrastructure
(“That
really
drives
whether
the
investment
is
significant
or
not
significant”),
and
whether
the
IT
workers
are
staff,
contractors
or
outsourced.

Talent
is
also
on
Ewe’s
list.
“You’re
buying
people
just
as
much
as
you’re
buying
technology,”
he
says.
Understanding
the
interdependencies
of
the
IT
systems
at
the
target
company
is
also
important:
“If
you
want
to
integrate
it
into
your
business,
you’re
going
to
have
to
dissect
it
to
some
extent.”

Top
of
Hunt’s
list,
though,
is
cybersecurity
as
a
check
against
the
riskiness
of
the
deal.

Macrie
has
heard
this
concern
from
buyers
he
has
advised
as
well.
“They’re
very
focused
on
the
cybersecurity
risk
profile,”
he
says.
“They
want
to
make
sure
that
any
investment
they
make
in
a
firm
isn’t
going
to
be
tarnished
by
a
severe
cyber
security
incident.”

Not
if,
but
when

At
music
distribution
company
CD
Baby,
VP
of
IT
Tom
Beohm
gets
involved
in
mergers
fairly
late
in
the
process.
“It
usually
comes
to
my
desk
once
the
initial
groundwork
has
been
laid,”
he
says,
“and
my
work
has
really
been
around
assessing
the
technology
stack
details.”

He
would
like
to
be
involved
in
the
process
much
earlier,
though.
“A
key
driver
for
M&A
is
often
potential
synergies,
and
the
value
that
IT
can
provide
in
those
conversations
is
the
nuance
around
the
capability
of
technologies
to
realize
those
synergies,”
he
says.

That
early
involvement
hasn’t
happened
yet
for
him
though.
“It’s
something
I’ve
talked
with
my
boss
about,”
he
says.
“Part
of
my
sales
pitch
was
that
our
company,
and
every
company,
is
a
technology
company
today,
and
technology
has
to
have
a
seat
at
the
table
to
be
successful
long
term.”

But
Le
Lu,
CIO
at
One
Workplace,
has
earned
his
place
at
the
negotiating
table.
“I’ve
been
with
the
company
for
a
long
time,
so
the
owners
are
comfortable
with
me
and
they
discuss
these
things,”
he
says.

When
the
Bay-area
specialist
in
high-tech
office
fit-outs
was
considering
acquiring
a
new
dealership
in
Seattle,
he
flew
there
to
help
conduct
the
due
diligence
process.

If
there’s
a
lurking
IT
problem
that
needs
solving,
“the
sooner
you
know,
the
better,
because
it’ll
come
back
to
hurt
you,”
he
says.
“It’ll
need
to
be
done
one
way
or
another.”

Paul
Lehair,
investment
director
at
AlbionVC,
cautions
CIOs
against
seeking
involvement
too
early
in
the
merger
process,
however.
If
an
employer
has
an
active
acquisitions
strategy,
then
there
may
be
many
deals
under
consideration
that
will
never
reach
fruition
for
one
reason
or
another.

“You
don’t
want
people
to
bug
you
constantly,
but
once
it’s
moving
through
the
funnel
and
they’re
looking
at
it
quite
seriously,
especially
if
you’re
talking
about
a
fairly
large
acquisition,
then
that’s
where
you
want
input
from
the
technology
team,”
he
says.

Putting
together
a
seating
plan

So
how
do
CIOs
get
that
crucial
seat
at
the
negotiating
table
when
the
conditions
are
right?

Just
ask,
says
Macrie.
“Sit
down
with
your
M&A
leader,
whoever
they
may
be,
and
talk
about
the
value
it’s
going
to
provide
from
a
synergy
perspective
and
a
growth
perspective
post-merger,
and
what
the
real
cost
is
of
getting
there,”
he
says.

“If
you
can
have
that
conversation
with
your
business
partners,
most
CIOs
will
be
successful
in
how
they’re
invited
to
that
table,”
Macrie
says.

And
if
all
else
fails,
says
ThoughtSpot’s
Nair,
then
go
for
the
nuclear
option.

“CIOs
need
to
get
out
if
they
don’t
feel
valued,”
he
says.
“You
should
demand
a
seat
at
the
table.
If
you
don’t
get
it,
you’ve
got
to
go
somewhere
else.
Companies
are
looking
for
forward-thinking
CIOs
everywhere.”

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