Acquiring Minds

Last year may have been a low-water mark for mergers and acquisitions in Australia but 2003's M&A activity is expected to hot up. The M&A challenge for the CIO is to ensure that due, not dud, diligence is done with regard to information systems.

BHP's Information Technology team had been considering what might happen if the company merged with another business. How could it get its ship in order? How could it ease any transition process? It knocked at Deloitte's door. Ulysses Chioatto, then a partner with Deloitte, was asked to provide advice and guidance on a just-in-case basis.

"Within a couple of weeks there was an announcement of the Billiton merger and the IT team were totally caught unawares," says Chioatto, now a principal of consulting firm SSAMMs. "Here was the IT team, trying to do something about it - but they were not in the decision-making team. When you only tackle these issues post-event there is an overwhelming amount of money involved in integrating those systems."

If the financial pundits are correct, and the mergers and acquisitions caravan is rolling again, many CIOs will have to tackle the same sorts of issues as did BHP when it merged with Billiton, only hopefully they will brought into the loop a lot sooner.

According to a recent Bulletin magazine report there is already $15 billion worth of merger activity waiting in the wings. Mergers such as Burns Philp and Goodman Fielder, Tabcorp (or Unitab) and Jupiters are already well canvassed and the list of potentials is long, including AMP, Southcorp, WMC Resources, Ansell, Aristocrat Leisure and MIM. And lest we forget, Bulletin owner Kerry Packer has himself cashed up in recent months which might well presage a flurry of his own takeovers.

Sean Gregory is the partner in PricewaterhouseCoopers (PwC) who leads the post-deal services operations of the firm. "After the transaction is consummated I help with the integration and planning process and deliver the cost-saving synergies. IT is one critical enabler to that," Gregory says. And no matter how difficult merging IT systems might be, "you very rarely see a situation where the CIO in the deal will stop the deal happening", he adds.

"As to what a CIO can be doing to harmonise the systems [in advance of a merger] I've never ever seen that happen," Gregory says. "I've never seen an IT person make a decision based on making a company more attractive as a merger target. They focus on making the company more efficient or effective and I tend to think that's the way it should be.

"It is the role of the company's management to make the business attractive as a business, not as a takeover target. The CIO has a duty to deliver the technology to make that possible," he says.

However, once it is game-on as far as the merger is concerned, the CIO ought to play a much bigger role than he or she traditionally has, according to Gregory. At present, he believes, CIO and IT due diligence in general is not carried out to the extent it ought to be. In some sectors, such as telecommunications and finance, he believes the situation is better, with the high importance placed on IT due diligence during the M&A process reflecting these industries' dependence on information and communications systems. Other sectors, he says, need to lift their game in order to deliver the synergies and benefits anticipated from mergers.

Join CIO, the CIO Executive Council & IDC on 6 October at Australia’s premier Melbourne event for senior IT executives – the CIO Summit 2010. Find out more or register now.

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