It's no secret that mergers and acquisitions are an active part of the accounting profession today.As owners reach retirement age, they are looking for someone to buy them out and allow them to move on to a well-earned retirement. At the same time, growing firms are looking for merger candidates to gain clients, gain access to needed staff skills, or to establish a presence in a desired market location. With a marketplace like this of buyers and sellers, it's no wonder there is plenty of activity!

Unfortunately, far too often the M&A process is conducted in tight secrecy, with only a privileged few aware that the acquisition is even being planned, let alone the timelines and agreed-upon conditions. In this scenario, it's not unusual for the IT staff of the gaining firm to be told, "We're bringing in 20 new people next week. Get them set up and ready to work."

While this might be a slight exaggeration, it is closer to the truth than many might believe.

A far more productive approach is a proactive one in which the IT staffs of both organizations are involved early in the planning process. After all, other than people, IT infrastructure is the largest investment for most firms, and is a critical strategic asset for firm improvement. Early and detailed IT planning can make a merger or acquisition unfold smoothly and productively for all concerned.

The Boomer Technology Circles, an organization made up of over 100 forward-looking and technologically progressive firms, has been the forum for a number of lively discussions on this topic. The rest of this article will draw upon those experiences, and capture some best practices and lessons learned in M&A planning.

Key considerations

Planning from an IT perspective should begin as early as possible in the process. Many firms have found it useful to establish a transition team (in both firms) and to have counterparts on each side communicate important details at a level appropriate for each.

Areas of investigation and discovery often include:

* Hardware: Examine the age, brand, model and configuration of key hardware elements in use in both the acquiring and the acquired firm. This examination should include file servers, related networking gear, desktop and notebook computers, and increasingly often cell phones and PDAs.

Many firms have found that a "rip and replace" approach is the least costly in the long run. Regardless of the age and condition of the acquired firm's equipment, support burdens are reduced when that equipment is replaced with the standard in place at the acquiring firm. This facilitates "ghosting" machines with a standard application image and simplifies periodic updates with patches, service packs and security enhancements.

* Application software: Experience has shown that the greatest efficiencies are achieved when applications are standardized across the combined firms. This means one tax software, one audit application, one e-mail system, one document management program, and so forth.

Two major considerations with application software are data conversion from a replaced system to the new one, and backward-compatibility. This means that a few machines might need to be kept with the old application installed to look back to prior years' data if all data is not converted to the new system. Data conversions, of course, must be rigorously checked and tested prior to shutting down the systems that created the data.

* Network architecture: This increasingly refers to the use of remote access technologies such as Citrix or Terminal Services to access application servers. If the acquired firm has not used these technologies, but the gaining firm does, there will be significant training issues involved. Running a centralized application base has its own set of licensing issues, but also saves hardware expense at the remote office location.

* Physical location: Will any staff physically relocate because of this merger? Will both offices remain open and at their full pre-merger strengths? These questions and many others will impact a variety of space and facility issues. The acquiring firm's IT department may have to plan for additional network cabling, additional telephones, the relocation of shared printers and scanners, and various back-office network configuration issues.

* Security issues: The acquired firm would have to be converted to all the security measures in place at the gaining firm's network. This would include password policies and standards, policies on usage standards, and even the degree of control each individual has over her own computer. Many small firms allow a high degree of user customization, while larger firms control this at a centralized level through network control measures.

* Communications: If the merger results in the addition of a new office location, the gaining firm will have to plan for wide-area network connectivity and integration of phone systems. In many cases, the pre-merger firms will be using different communications vendors and service providers. Contracts will have to be re-negotiated to add the additional users and locations, while hopefully gaining some price reductions through economies of scale.

Other communication issues often include standardizing cell phone service providers, and creating or expanding shared pools of calling minutes.

* Training: While not strictly an IT issue, the impact of training in a merger is huge! If users in the merged firm are required to learn new hardware, new application software, and the use of remote access techniques, good training is an obvious requirement.

Beyond this level of user skill training, however, is a whole layer of orientation and cultural integration into the gaining firm. Some firms will treat the merged employees as new hires and give them the complete firm orientation that a newly hired employee would receive upon starting work. In addition, there will be a requirement for training on the combined firm's operating standards, policies and procedures. From an IT perspective, this may include policies on electronic mailbox limitations, document filing and retrieval standards, and back-up procedures.

Time and effort invested in training early in the process has a sure payoff in smooth operations further down the road.

Closely related to training are support policies in the combined firm. Make sure everyone understands how the help desk functions, and the procedures for requesting support. Especially if new applications are involved, reliable and courteous support can be a great morale builder for the employees learning their way in a new environment.

* Special issues: Firms have found that the combination and standardization that occurs during a merger is a perfect opportunity to review software licenses. Make sure that every server and workstation is properly licensed for the user load that it supports, and be sure to include the special licensing requirements for remote access services.

Disposition of old hardware is often an issue. If the merged firm's equipment is replaced, there will be an instant inventory of old hardware to be disposed of. Be especially careful of data security on these retired computers. Remember that simply deleting files is insufficient! Multiple formats or special wiping procedures will be required to ensure client data is not compromised.

Some firms allow employees to buy retired machines at a discount price, others donate them to suitable recipients, and still others pay recyclers to take them away. How it's done is not as important as having a plan for it in advance.

Best practices and lessons learned

While every merger or acquisition is unique, a few best practices can be distilled from the experiences of the Boomer Technology Circle firms.

These include the early establishment of transition teams to identify issues, map the merged firm into the gaining firm, and coordinate. Firms should create a statement of "Day One" standards detailing what is expected to be in place and functional on the day following the merger. Applications must be standardized across the new firm. Conversion issues are critical in these cases.

Training and support are critical success multipliers. The faster people are trained, and the better they are supported in their new environment, the more productive they will be. Training is also an essential tool in the integration of new staff into a combined firm culture.

Finally, intangibles like caring and concerned leadership at all levels critical. Leaders must remember that people are undergoing a traumatic transition and need to be guided through it to the desired outcome.

In summary, experience from many firms has shown that mergers and acquisitions can be smoothly accomplished and the hoped-for gains rapidly achieved. From an IT perspective, this means careful and detailed planning, beginning early in the process.

Remember that surprises are for birthdays, not M&A planning!

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