It's no secret that today mergers and acquisitions are an extremely active part of the accounting profession. These combinations are due to numerous reasons, with retirement, leadership and growth at the top of the list. As owners reach retirement age, they are looking for an exit strategy. At the same time, growing firms are looking for merger candidates to gain clients, to 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 IT leadership is 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 innovation and growth. Early and detailed IT planning can make a merger or acquisition unfold smoothly and productively for all concerned.

The Boomer Technology Circles, an organization of over 100 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.

Don't expect to get this information from M&A consultants. This information may cause you to rethink the importance of technology in any deal, especially in today's environment, where technology is an integral part of all services. Technology is part of a firm's culture - either they view it as a strategic asset or as overhead. Technology may change or even become a deal-breaker in some transactions.



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, most recently, cell phones and PDAs. Many firms have found that a "rip and replace" approach is 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.

Desktop and laptop computers are a small part of the overall IT expenditure, yet this is where most people focus. The real investment and support comes in the infrastructure, which supports the need for standards and defined unique processes.

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 end-user training. According to Gartner Group, for every hour of training, you acquire five hours of increased capacity.

Network architecture: This increasingly refers to the use of remote access technologies such as Citrix or Terminal Services to access application servers, and now SaaS or the cloud. 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. Many firms have moved all or part of their infrastructure to the cloud. The recent hurricanes and tornados have shown the advantages.

Physical location: Will any owners or 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. With reliable and fast remote access, firms can reduce their office space requirements. Work is what you do, not where you go!

Security issues: The acquired firm will have to be converted to all the security measures in place at the gaining firm's network. This will include password policies and standards, policies on usage standards, and even the degree of control each individual has over their 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. Security and client access to data generally improve as firms move to the cloud.

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 renegotiated 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. Support of cell phones and PDAs is rapidly becoming a major issue for IT departments due to security and the rapid change in both phones and plans. Standards and adherence to firm policies are extremely important. Consumer electronics are driving the market. Good examples are the iPhone and iPad, which are often purchased by partners and require support from IT.

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 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 acquiring 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, privacy, security, and backup 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 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 equipment used by the merged firm is completely 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.

Budget: Firms are starting to realize the IT investment when entering into mergers or acquisitions. As mentioned earlier, a "rip and replace" policy is generally the best. Experienced firms are now budgeting approximately $12,000 per user for hardware, software, conversion and training. This may seem high to you, but I have seen enough budgets and actual expenses to know this number is reasonable. It is more expensive to maintain dual systems, support multiple applications and wait for six months to make the conversion. In 2010, the best firms spent approximately $10,000 per full-time-equivalent for IT, so the $12,000 number is reasonable.

Too often technology is an after-thought of managing partners when it comes to mergers and acquisitions. It is not unusual for a firm that is on the market to under-invest in the year prior to acquisition. Granted, there are economies of scale with regard to licensing and end-user computers. Typically this is more than offset by the required training to standards and integration of the cultures, of which technology is a major component.



While every merger or acquisition is unique, a few "best practices" can be distilled from the experiences of the Boomer Technology Circles firms. These include the early establishment of transition teams to identify issues, mapping the merged firm into the gaining firm, and coordinating extensively. 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. Many firms have decided that the "rip and replace" method of hardware integration is the most beneficial in the long run. Likewise, applications must be standardized across the combined firm. Data 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 are critical. Leaders must remember that people are often 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, a reasonable budget and the involvement of IT professionals early in the process. This is just another reason firms are rapidly learning the value of a chief information officer with a seat at the management table.

Success is based upon teamwork!


Gary Boomer, CPA, is the president of Boomer Consulting, in Manhattan, Kan.

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