Few business situations are more fraught with equal measures of peril and promise than mergers and acquisitions. Billions of dollars change hands. Thousands of jobs are affected. Yet the majority of M&As never live up to the deal-makers' giddy expectations.
Despite all the risks, M&A deals are surging (up 24 percent this year) and more CIOs are flexing their business muscles as they join the advance team evaluating the risks and rewards. As Managing Editor Kim S. Nash writes in our cover story ("Top CIOs Get Deeply Involved in Merger Deals"), "sometimes only a technology leader can recognize IT assets that could increase the value of the deal."
Our story details some of the key lessons learned by IT leaders involved in recent acquisitions made by Land O'Lakes, Jacobs Engineering and Avnet, an electronics component distributor. "Not many of us get trained in due diligence or mergers and acquisitions. You're learning on the job," says Steve Phillips, CIO of the $25 billion Avnet and a veteran of 51 acquisitions in the past decade. "Your first one is always really hard."
Being part of a due diligence team is a valuable way to stretch your skills as a business executive. "It's a great opportunity to differentiate yourself from other CIOs," says Jan Roehl-Anderson, a principal at Deloitte Consulting. At $11.8 billion Jacobs Engineering, for example, SVP of IT Cora Carmody's extensive due-diligence experience brings her into regular discussions with the board of directors.
At Land O'Lakes, CIO Mike Macrie hired a former colleague with international M&A experience, who then created an IT playbook of speedy, reliable processes to follow in evaluating pending deals. "We had to hire someone with the ability to talk about risk, planning and synergy targets," Macrie says, "and how IT could be an enabler to possibly gaining more."
In a process usually dominated by number-crunching and legalese, a CIO brings something new and necessary to the table: expert knowledge of IT risks. How many accountants can spot a potentially dangerous cybersecurity hole or the smoking gun in a software license? How many lawyers can figure out the real value of a company's data or IT capabilities?
"An informed CIO could suggest that maybe the company is not worth what it says it's worth," says Rudy Puryear, who runs the IT practice at Bain and Co. "These things don't appear on the surface, but a couple layers deeper."