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Corporate mergers and acquisitions (M&A) and divestitures present unique challenges to a company’s technology team, but they are also a great opportunity for forward-thinking chief information officers (CIO) to help transform the business.
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Learning from the leaders:
how CIOs can drive
more value in
corporate transactions
In today’s corporate landscape, integrating multiple data structures and creating technology scalability are just two of the unique transaction challenges. Yet, they are also prime opportunities for business transformation. While CIOs and technology experts are typically involved in the early stages of a transaction, new data from the 2024 EY CIO Sentiment Survey reveals that the most successful maintain a higher engagement across the deal lifecycle, especially in the post-close phase.
While CIOs and technology experts are typically involved in the early stages of a transaction, new data from the 2024 EY CIO Sentiment Survey reveals that the most successful maintain a higher engagement across the deal lifecycle, especially in the post-close phase.
When organizations are already spending dollars on integrating or separating, it’s a great time to think through changes that can create more value in the long term.
Matt Bartell, Americas Deal Technology Leader at EY-Parthenon.
Post-close involvement is crucial for achieving successful integration, enhancement, and transformation of IT operations as part of a transaction. In a wide-ranging interview with Reuters Plus, EY professionals offered some practical steps CIOs can take to prepare for challenges, stay engaged, and make the most of their influence throughout a deal’s lifecycle.
1
Stay active in the big-picture
decisions about the transaction
2
Make sure the right
IT leadership team is in place
3
Create a tech stack landing zone to smooth the transition
4
Optimize contractual terms
with vendors and suppliers
5
Follow through post-close to help improve business processes
6
Introduce GenAI to help with data management and analysis
1
Stay active in the big-picture decisions for the transaction.
As a transaction unfolds, it’s common for CIOs to step away from governance forums and other planning teams to concentrate on making sure the technology transition is smooth—but there are advantages to remaining involved.
“Stay active in forums and continue to engage business counterparts throughout the organization,” Bartell advises. “It’s a great way to help guide decision-making and ensure you maintain some influence.”
2
Make sure the right IT leadership team is in place.
With the many changes inherent in an M&A transaction, talent is often overlooked—but it’s a key piece of the puzzle, says Mazen Baroudi, Technology Strategy and Transformation Leader for EY Americas. The transaction offers an opportunity to make sure the IT team has the right structure and talent.
Make sure you have a leadership team in place that can make the right decisions during the transaction and bring the right folks over to keep running IT.
Mazen Baroudi, Technology Strategy and Transformation Leader for EY Americas
Baroudi urges CIOs to anticipate the needs of the new organization. A larger enterprise will have different needs than a smaller company.
“Try to create the organization and team that’s right for the size and shape of the new entity.”
3
Create a tech stack landing zone to smooth the transition.
Blending systems and processes can be a formidable challenge as two companies merge. A tech stack landing zone—essentially a staging
area—is a great way to simplify the process.
The survey confirms that 78% of CIO leaders create landing zones. “There are two flavors of these landing zones,” Baroudi explains.
“One type is a cloud area that provides infrastructure to get a new company up and running as quickly as possible. The other approach is to stand up an ERP that’s a clone of what you have in the parent company, then import all the finance and transaction data from the acquired company.” Both arrangements help to accelerate deals.
Setting up a landing zone in advance creates a turnkey solution and helps CIOs to achieve their goals.
Sri Prabhakaran, Principal, Strategy and Transactions, EY-Parthenon, Ernst & Young LLP
4
Optimize contractual terms with vendors and suppliers.
Technology is typically one of the costliest components of a transaction. While the IT industry is focused on reducing those costs with, for example, the move toward cloud computing, there’s still considerable expense associated with data hosting and software purchases or subscriptions. CIOs need to be proactive about putting transaction-specific contractual terms with key vendors and suppliers in place to maximize the value of the transaction.
“If there’s a significant increase or reduction in the volume of licenses required after an integration or separation, that can trigger different commercial thresholds in contracts,” says Bartell. Changes of control terminology and transition service agreements (TSAs) can also be tripping points.
“In their contractual terms, technology vendors often limit the ability of organizations to offer TSAs. It’s advantageous for CIOs to anticipate all these complications so they can make provisions ahead of time.” Bartell adds.
5
Follow through post-close to help improve business processes.
Staying the course post-close to support the expected business outcomes can add considerable value. That’s because the transaction is an opportunity to rethink the way work gets done in an enterprise.
“Your review could yield significant improvements in processes or introduce new technology that can automate or speed up
time-consuming tasks,” Baroudi says. “The CIO plays a critical role post-close in facilitating and enabling the transformation of the way business gets done. They are the link between the technology landscape and the outcomes that need to be achieved.”
6
Introduce generative AI to help with data management and analysis.
Generative AI (GenAI) is touching everything, including M&A. According to the survey, CIO leaders foresee a greater than 40% impact from the adoption of GenAI in the areas of integration and separation planning, IT and cyber due diligence, and post-merger integration.
Right now, GenAI is poised to optimize processes and speed up transactions, Baroudi says. “In a deal, speed is of the essence. If you have the data and contracts within a database, you could use GenAI to query that database and get the information you need. It’s a great opportunity for humans to get assistance that can give them information and synthesize it more quickly than ever before.” Baroudi adds. GenAI can also help analyze cyber threats to make sure the IT stack is ready for post-merger transformation.
GENAI
40% IMPACT
GenAI as a transformative post-transaction tool
Even after a transaction is closed, there are often many data problems to address, from document and data transformation to sorting out temporary agreements. “GenAI can play a role in looking at these documents and it can also help come up with new contracts,” says Prabhakaran. Still, he stresses the importance of human oversight. “Companies should use GenAI as a catalyst to get the transition done quickly, then use people, assisted by GenAI, to carry out the transformation.”
GenAI can speed up transactions, making room for more innovations to come. CIOs can take advantage of transaction scenarios to shine as leaders who pioneer new technologies and uncover new process efficiencies.
“There’s an opportunity here for CIOs to establish themselves as digital leaders around the topic of AI and influence their counterparts in supply chain and other areas,” says Bartell. “If they stay engaged throughout the deal lifecycle, they have a chance to lead that agenda.”
GENAI
About the survey
The 2024 EY CIO Sentiment survey gathers insights from CIOs of leading organizations on the challenges they face in pursuing a growth agenda in the age of GenAI. Respondents include 500 US-based CIOs from a broad range of industries: consumer products and retail, healthcare, life sciences, advanced manufacturing and mobility, tech media and telecom.
CIO leaders are defined as those involved in more than 10 transactions and report having significantly met their technology deal objectives (IT synergies, on-time deal close, post-close IT TSA exit and run-rate cost stabilization).
The views reflected in this article are the views of the author and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.
To learn more and access the survey results, visit
ey.com/CIOsurvey
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