by: VMware Senior Director, IT Mergers and Acquisitions Services Romy Kaura
Mergers and acquisitions (M&A) are integral to the business world, and companies now view them as a key growth driver.
So, where does IT fit?
Historically, IT organizations were plugged in late into the deal lifecycle. This resulted in an IT integration approach that was unplanned, more reactive, and unable to effectively define & communicate integration complexity. Not surprisingly, this traditional high-pressure approach—combined with copious amounts of uncertainty—simply does not work.
Today, IT plays a central role in M&A integration as technology underpins all business functions, including core IT services. That means for effective planning and execution, IT teams must understand the deal drivers, define the degree of integration, and ultimately gauge and articulate the complexity of the overall deal.
The process starts by the VMware IT team classifying deals into four basic types:
- Technology Tuck-In. This deal’s goal is to acquire IP and talent. The approach is to Adopt and Go, which means select integration of desired target assets and employees with the VMware infrastructure.
- Full Integration. This involves expanding/strengthening adjacencies, acquiring the full business (including all assets and liabilities), or driving market and revenue momentum via new products. The approach consists of full integration of acquired company with the VMware infrastructure, business operations, and similar.
- Best of Both, Retain Hybrid. This deal type is similar to a full integration, except the approach is to create a hybrid infrastructure by choosing only the best elements from VMware and the acquired company.
- Standalone. This deal type involves creating a new platform footprint that enables entry into new spaces, with minimal integration with the VMware infrastructure.
Lasting and Wide-Ranging Impact
Once the deal type has been determined, the real work begins. Decisions from one area can have a huge impact on other areas if interdependencies are not understood and addressed effectively. For instance, a decision to move the acquired company’s employees to VMware sites would have significant impact on employee productivity and business continuity if the network dependencies between the acquired company’s assets (data centers, branch offices, cloud, etc.) and VMWare sites are not clearly defined and addressed prior to any move.
Journey of the Mind (Map)
To manage scenarios like those mentioned above, the VMware IT M&A team developed a mind map to articulate end-to-end IT M&A interactions with cross-functional teams, highlight interdependencies between different functions, and to effectively size and scope the deal. Once the requirements from each function are gathered, the next step is to gauge and articulate the technology integration complexity. This enables realistic budgets, resource requirements, and timelines to be generated.
Employ the Right Tool
The mind map is only half the equation. VMware M&A IT—in collaboration with our Center of Excellence (CoE) —has also built a Deal Complexity Tool that helps to quantitatively gauge the technology complexity of each acquisition, based on dimensions such as:
- Company size & revenue
- Culture and appetite for change
- Go-to-market strategy
- Acquired company’s IT organizational structure and operating Model
- Technology landscape (such as network, security, cloud, core infrastructure, content and collaboration enterprise applications footprint)
- Business process deviation
- Legal and regulatory compliance
This tool leverages an Analytical Hierarchy Processing (AHP) model in which each dimension is assigned a weight based on the relative importance for a set of questions. Once weighted, a complexity score is calculated for each deal.
In our experience, a framework and tools offer an effective approach to assess, adopt the right rigor and deliver seamless M&A technology integrations.
By playing an active role early in the M&A process, IT can more quickly and adeptly integrate technology into VMware’s operations. Mind maps help IT understand the end-to-end impact of the merger or acquisition, including cross-functional team interactions, functional interdependencies, and sizing and scoping of resources.
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