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Six Tips for Succeeding with the Art of Acquisition

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By Tim Merrifield, Senior Director, Cisco Internet Business Solutions Group

If it is true that practice makes perfect, Cisco should have a pretty good idea how to capitalize effectively on an acquisition strategy to promote growth. Since 1993 we have acquired 129 companies and earned a reputation for turning acquisitions into a competitive advantage.

Mergers and Acquisitions: A Way to Do Business

The odds are stacked against most companies. Only about 25 percent of mergers and acquisitions (M&A) deliver the desired business objective. As the IT leader directly responsible for Cisco’s initial 96 acquisition-related integrations, I have learned that M&A is not a project. It is a way of doing business.

To get the most business advantage from a merger or acquisition, the organization must make a foundational investment in a governance structure and process that is:

  • Repeatable
  • Measurable
  • Constantly improving

This approach guided Cisco through 25 acquisitions in a single year, and 12 simultaneous integrations. As a result of this experience, I can share the following lessons and best practices:

1. Invest in an appropriate business and IT governance structure to proactively and comprehensively prepare for and conduct integration efforts.

As the chief information officer (CIO), you lead IT but do not control everything that technology touches. You must develop a layer of governance that takes into account the complexities of integrating interdependent business processes and technologies. A CIO who successfully integrates two companies will quickly move from a role of responding and reacting to one of guiding and architecting. This must begin with exercising influence at the top levels of the organization by establishing business partnerships with leaders of the crucial business units.

Striking the balance between establishing a rigorous governance structure and exercising influence to secure executive support for operational decisions is part science and part art:

  • Not only must IT execute technology directives such as connecting networks and enabling applications.
  • The CIO also must lead discussions with business counterparts and build a shared vision for how technology will be used to facilitate business growth.

For instance, we adhere to our CIO's "Cisco on Cisco" philosophy of using our own products and services exclusively. If we buy another company, we do not maintain multiple phone systems or run routers made by other manufacturers. We standardize on a single technology, wherever and whenever possible.

Often, this acquisitions present opportunities in this area. Effecting change might mean deploying a new converged network you have long wished for, accomplishing the dual goals of putting both companies on the same platform and extending the benefits of a network upgrade. The principles of standardization should be applied to integration efforts to reduce costs and increase productivity.

2. CIOs must establish foundational business and technology fundamentals to guide integration activities.

This involves eliciting answers to some essential questions and understanding the technology implications of those decisions. Will the combined business:

  • Operate as a single legal entity?
  • Adhere to a single compensation model?
  • Run one online employee services portal for the entire workforce?

Every department will make its own decisions, but part of the art in an acquisition involves the CIO facilitating these conversations and giving business leaders a framework for discussion. You can show your business leaders how each decision will change the way systems are deployed and the integration is run. It us up to you to draw that cause-and-effect scenario to establish yourself and your department as a significant influencer in the integration.

3. Deploy an appropriately resourced, prioritized, and measured execution team.

By its very nature, M&A activity is often secretive. Typically, few organizations earmark budget or devote their best staff to an acquisition-related integration. In the early days of acquisitions at Cisco, some of my colleagues would cringe when they saw me approaching their offices, fearing I would pull them into an integration project that would add to their workload.

4. Make the integration a priority.

This means deferring some ongoing projects and realigning staff. The CIO must strike a clear and effective tone in this regard. You want your best employees working on integrations because:

  • Acquisitions give superior performers a chance to demonstrate their skills implementing what is likely to be the organization’s most critical business initiative of the year.
  • These efforts touch a broad range of people and processes within the company, giving valuable employees the visibility they deserve.

Finally, progress must be measured. Whether your company looks at budget, speed of technology deployment, or employee service provisioning, it is essential to calculate success

5. Invest in postacquisition integration.

The money spent in this area yields a competency that instills your executives with confidence. They will have faith that they can pursue companies more aggressively and will trust an acquisition to deliver on its anticipated goals. This, in turn, accelerates growth opportunities.

6. Use the skills necessary for an acquisition on other projects.

Many of the skills used in an acquisition can be tapped for other critical change events, such as divisional realignment or compliance initiatives. On a more personal level, as IT leaders, we have long been asking for a so-called seat at the table. Acquisitions give our voices a chance to be heard. The CIO of a major retailer I worked for led postacquisition integration efforts so effectively that his company included him on its M&anp;A evaluation committee.