5 principles for successful post-merger IT integration

What do an English Premier League football club and recent global M&A trends have in common? 

Both share common ground in their evolution, focusing on key facets such as balancing global vs. regional strategies, strategic resourcing, and investment in value creation initiatives. By focusing on these areas, Brighton & Hove Albion F.C, a club based in the South Coast of England, has not only successfully qualified for prestigious European knock-out tournaments but has also generated profits of hundreds of millions of pounds through player transfers. The club has emerged as the benchmark for aspiring teams outside of the English Premier League's big six clubs in terms of both business acumen and sporting fulfilment. The club’s ethos is shaped by its owner, Tony Bloom, an expert in data-driven modeling for financial gain in sports betting through his other successful company, Star Lizard. 

In recent years, we’ve seen these same trends play out within global and complex mergers. These trends require organizations to focus on five critical pillars for ensuring the success of IT integration mergers in the post-close global environment. 

Understanding the as-is and to-be

Top-flight football analysts scrutinize data on their current players and opposition to better strategize. Similarly, successful post-close value creation begins with a thorough understanding of the current IT landscape.  

Understanding the organization’s current state technology environment is vital, akin to understanding the team's current skillsets and weaknesses. This includes: 

• IT landscape review: Evaluate existing asset management systems (AMS) for insights into the current landscape in both organizations. If no AMS is in place, conduct application/system surveys to gather crucial details.
• Talent review: Map strengths and weaknesses of the existing talent in both legacy organizations. Identifying critical stakeholders who function as owners and operational users of various IT applications and services across the global organisation is imperative. These stakeholders are instrumental in decision-making related to the realization of synergies through the consolidation and elimination of redundant IT systems.
• Budget reviews: Assess legacy IT budgets to inform decision-making and resource allocation, essential for effective post-close value creation—akin to a well-planned strategy paving the path to success.

Understanding the current state, including the strengths and weaknesses of existing talent, current systems, and legacy IT budgets, lays the groundwork for crafting a strategic "to-be” state for the integrated entity. This involves creating an integrated view of enterprise architecture or a target operating model—outlining future-state technology teams, applications, and surrounding infrastructure. Once the to-be is drafted and socialized, we recommend leadership also develop a robust technology roadmap to guide the transition to target state.   

Global vs. regional approach to IT governance

Strategic integration management often balances a regional and global approach to systems, processes, teams, and budgets. This dynamic mirrors Brighton F.C.’s global-first talent acquisition strategy, demonstrated in their recruitment of international players like Japanese talent Mitoma. The global vs. local approach to IT governance depends on the nature of the business and involves the operational considerations, outlined below:  

Global approach to IT governance 

Successful mergers often adapt a “global-first” or centralized approach to the IT function and followed by the incorporation of local or regional considerations. Key benefits of a global-first approach include:

• Standardization and consistency: Embracing a global approach fosters the standardization of IT processes and systems, promoting uniformity across the organization.
• Cost savings: Centralized IT procurement enables potential cost savings by leveraging bulk purchasing and negotiating more favorable contracts.  This approach empowers private equity firms to deploy leveraged purchase programs across their portfolio. 
• Enhanced risk management: A centralized IT governance structure streamlines risk management processes, guaranteeing the consistent implementation and scalability of cybersecurity and compliance measures. 

Regional approach to IT governance 

While it’s crucial to establish a global IT integration strategy from the offset, organizations operating at a global level must also factor in regional needs. Similar to how Brighton F.C. tailors its strategies to each player's strengths, this approach can prove advantageous for businesses facing significant regional variations in margins and technology spending. This approach offers: 

• Regional flexibility: Adopting a multi-local approach allows for tailored IT solutions to meet the specific needs and preferences of individual regions or business unit.
• Overinvestment prevention: In regions with lower revenues or margins, a multi-local approach can mitigate the excessive IT expenditure, aligning IT spending with the financial performance in each region. For instance, a recent engagement by West Monroe involved conducting a business case for a global HR information system implementation, revealing that a Tier 1 solution the business was considering was not a cost-effective system for lower-margin geographies.
• Regional IT compliance: Regional IT requirements are often shaped by regional regulations, leading to the need for specialized system set-ups or vendors required. This is especially prevalent within HCM and ERP system implementations, as seen with Europe’s GDPR and tax laws that often demand customization within the ERP. Ensuring an overarching governance framework around enterprise architecture is imperative, much like a football team maintaining a set of overarching strategies. This alignment prevents technology sprawl, mitigates the risk of shadow IT, and enhances cybersecurity—all while staying aligned with business strategies. 
  
  

Project resourcing and skill sets for IT integration

One of the primary reasons for timeline and/or budget overruns in large, complex mergers is ineffective project resourcing or inadequate skill sets to accomplish the task. 

Consistent team from diligence through post merger integration 

While geographical factors or additional capacity may necessitate some degree of separation, there’s a growing trend toward keeping due diligence and post-close value creation teams within the same third-party provider or even team. This approach minimizes friction, accelerates the process, reduces costs, and preserves valuable relationships and business-specific knowledge. Consolidating organizational expertise further enhances the efficiency and effectiveness of post-close value creation efforts.  

IT Integration management office (IMO) 

Whether internal or external, the IMO oversees all integration workstreams, ensuring quality assurance, implementing best practices, and managing project planning and execution. It also serves as a bridge for cross-functional dependencies and brings critical risks, issues, and decisions to the attention of leadership and the private equity owner. 

Internal skillsets 

Private equity firms are increasingly recognizing the value of internalizing specific functional and sub-sector expertise. Optimizing the organizational design is crucial for realizing business outcomes, especially considering that labor costs often constitute 40-60% of company expenses. Ensuring the merged company has adequate internal teams to manage integration projects is fundamental to achieving post-merger success. 

In a recent $2 billion global merger, West Monroe's Organization & People team helped company leadership develop a "spans and layers” analysis across various functions to understand and visualize the company's current organizational structure and hierarchy, much like a football club assessing its team structure to identify strengths and weaknesses. This helped the leadership align their “to-be” structure with business strategy by evaluating current roles/gaps, spans & layers, costs, and scalability. 

Future value creation 

Tony Bloom's 2009 investment in the construction of the Amex stadium for Brighton F.C. boosted match day revenues and elevated the club’s public profile, demonstrating significant value creation. The recent shift in private equity buyouts prioritizing EBITDA improvement over leverage for exit profits underscores focus on post-close value creation. While many value creation opportunities are industry-specific, there are some cross-industry initiatives and technologies that are increasingly common in global mergers. 

Measuring success

Just as football clubs measure success through on-pitch results, measuring the success of post-close value creation is crucial to ensure that integration efforts align with the organization's objectives and deliver the expected outcomes. Key performance indicators include: 

• Synergy capture: This involves monitoring the realization of projected cost savings and efficiency improvements resulting from the integration. Typical synergies include reducing the total IT expenditure of the combined pre-merger organization through contract consolidation and rightsizing IT organizations. 
• Quality of data migration: Evaluating the accuracy and completeness of data migration to ensure seamless transfer of critical information without errors.
• Cybersecurity Compliance: Measuring cybersecurity compliance is essential in an era of increasing cyber threats. A robust security foundation is particularly crucial for mergers expecting a high volume of future M&A or add-ons." 

Continuous monitoring and benchmarking of success, like a coach constantly reviewing game footage and statistics, ensures that the integration project stays on track and that the organization can adapt to changing circumstances.  

Conclusion

A strategic approach is essential for post-close value creation—as is understanding the current landscape, aligning governance models, developing talent, and measuring success with balanced KPIs. By addressing these considerations, organizations can navigate integration complexities and achieve sustainable success. This process mirrors Brighton F.C.’s journey to success, emphasizing understanding strengths, investing in development, and effective resource management for long-term growth.