SIDEBAR: Snapshot: GE Money Australia/NZ

GE Money's history in Australia and New Zealand is one of growth via acquisition:

• 60+ Integration projects over 5 years
• 4 Companies integrated
• Australia users grown from 500 to 3500+ since 1998
• 3 Data centre moves
• 6 Portfolio migrations
• 4 System replacements
• Shared services & common operating environment for Oracle financials in 22 countries

SIDEBAR: IT As an Enabler of Post Merger Integration

How to navigate the tumultuous waters of mergers and acquisitions

By Mike Cooke, Ken DeNatale, Bob Razvi and Samudra Sen | Booz Allen Hamilton

The sad fact is that an estimated 85 percent of mergers fail to meet expectations. Moreover, the information technology (IT) function often bears much of the blame. According to a recent survey by Booz Allen Hamilton, IT issues are the third most cited cause of merger failure, after operating philosophy and management practices.

While there are a number of reasons for IT's poor showing, the chance of success can be greatly increased by the CIO's realization that he or she has two hats to wear during the merger integration. First and most obvious, the CIO is responsible for the merger of the two IT functions, including combining the organizations, integrating the infrastructures, and rationalizing the applications portfolio. Second, the CIO must focus his/her organization - with laser-like precision - on enabling the business strategies of the merged organization. The challenge with this prescription is that while most CIOs are comfortable with the first objective (it is what they do every day), many have less experience in delivering against the unique business demands posed by a merger.

Booz Allen has assisted numerous CIOs navigate the tumultuous waters associated with mergers and acquisitions. We have identified four key learnings to help the CIO manage the merger process:

Seize the Vision Synergies between the two merging organizations are identified early, usually prior to the merger (as part of the rationale for a merger). Once the merger is executed, most organizations come under immediate and intense pressure from the market to quickly realize these synergies. Often this pressure manifests itself as top-down, across-the-board cost reduction targets for each department, IT included. In the worst cases, the IT organizations overreact and place all emphasis on cost reductions (mainly through head count reductions and project shutdowns) and lower service levels. While in the short term, the IT organization may look like heroes, over the long term the picture will change as it becomes apparent that many of these changes were detrimental to the overall business strategy and merger objectives.

Moreover, while the IT cost savings from the merger are important, they are usually smaller than the business synergies enabled by IT. Booz Allen's experience with merger integration suggests that approximately 40 percent of the value created from mergers is dependent on IT. While all mergers are different, the following represents a "typical" profile for merger synergies:

Therefore, it is important that the IT organization:

• Understands the vision and strategy of the new organization along with the merger objectives
• Translates the strategy and the objectives into business capabilities and processes
• Ensures that the IT capabilities are in place to enable the business capabilities and processes

The CIO bears final responsibility for the degree of assistance IT provides the business in helping them realize their synergies. Therefore, it is the CIO who must visibly drive the priorities and activities around synergy capture

Partner with the Business A major component of post-merger integration is identifying and designing the new capabilities and business processes of the merged organization. Functional design teams (with representation from both organizations) collaborate to adopt or develop new business processes and strategies that take advantage of the strengths of each organization. Unfortunately, IT's involvement in these design teams can sometimes be an afterthought. The fact that approximately 40 percent of merger synergies are dependent on IT should be reason enough to gain IT a seat at the table.