How to Create an M&A Runbook

5 minute read
IT M&A Runbook

As the economy rebounds, many companies are looking to mergers and acquisitions (M&A) to help them grow faster and better compete in a tough marketplace. Merging or separating IT infrastructure effectively and quickly requires careful planning, but many IT organizations are given limited time to plan. Creating an M&A runbook will ensure IT organizations are ready to respond quickly.

Imagine two large enterprises, each with unique IT platforms, applications, hardware configurations, and data centers combining into one company. Or, in the case of divestitures, imagine one parent company with numerous subsidiaries, operating autonomously, and the amount of work that is involved with a series of rapid divestitures.

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Before an M&A or divesture can occur, a company and IT department should be able to answer two important questions:

 1.    What are the business objectives behind this move?

 2.    What are the potential IT conflicts for integration or separation?

Knowing the answers to these two questions will help an organization respond to requests from senior leadership on discussions around the impact of potential mergers, acquisitions or divestures. To keep things simple moving forward, when M&A is mentioned, it also means divestitures.

What is an M&A runbook?

Simply put, a runbook is a collection of procedures and operations that IT departments can use to effectively manage, execute and troubleshoot recurring processes or events. In this situation, a runbook is used to prepare for a change. It is a step-by-step set of plans for IT infrastructure integration or separation so an organization doesn’t have to start from scratch each time. Some companies prefer creating a single comprehensive runbook that covers all aspects of the IT operation, while others create modules for each domain, executing them as appropriate. Whichever model an organization chooses, the use of runbooks can significantly reduce the time, cost and risk associated with optimizing return from a change.

M&A runbooks help technology leaders to jumpstart the processes of allocating resources and modifying operational activities that are impacted when a change happens, which enables them to:

Quickly understand the financial impact.IT leaders will be able to quickly assess the financial consequences of a change when it comes to the technology investment involved.

Better assess current and future technology capabilities.The implications and risk associated with the IT infrastructure that the company would be acquiring or letting go of can be analyzed. Technology leaders will know what technology they currently possess and what gaps exist.

Know what service or organizational changes need to occur. Technology leaders will know which skills and capabilities their IT organization possesses, so when new staff is acquired, they will be able to quickly assess how to best integrate staff.

The amount of effort needed to integrate technology architecture.By having project plans for each of the IT domains, technology leaders will know what it will take to integrate the IT environments. It is important to keep in mind that full integration may not be needed with an M&A. It depends on the objectives of the business and the goals of the M&A.

How to Build an M&A Runbook

So how does an IT organization create a runbook or runbooks in anticipation of multiple changes? Here are five helpful steps.

Step 1: Determine your current state.

An IT department should first establish a baseline, and maintain it, to assess where the IT organization and business want to go.

Step 2: Develop runbooks for each technology domain.

Create specific discovery points (version, users, administrators, size of system, etc.) for each domain. Assess and create project plans for migration and integration based on the company’s business objectives and the objective of the M&A. Keep in mind that there are at least 10 IT domains that should be examined to ensure correct alignment between IT strategy and the business.

Under each one of these domains, a detailed project outline should be created that can be quickly turned into a formal project plan, based on M&A requirements. This includes the steps an organization can take to assess the current maturity level, health and risks associated with the M&A. Once project outlines are created for the domains, a company will be able to develop a holistic plan for their IT infrastructure, based on their particular business drivers and risks. IT will be able to share it with senior management so they can do their M&A due diligence around the cost to integrate.

Step 3: Create a roadmap for the execution of the runbooks. 

The roadmap is based on key objectives from each domain, resource availability and anticipated return from the M&A. It allows the organization to prioritize and consider the interdependencies of activities related to each domain. 

Step 4: Understand the costs of executing runbooks by domain.

These costs then are associated with the overall roadmap for the development of an integrated budget reflecting capital expenditures (CAPEX) and operating expenditures (OPEX). This also allows for budgeting across time periods to optimize the use of limited financial resources. This information helps the business as it creates a business plan associated with M&A.

Step 5: Identify the variables that impact the execution of the roadmap.

This understanding will allow the IT organization to budget human, financial and technology resources appropriately when dealing with the change.

Better Understanding the Business Risks and Costs

An M&A runbook will help a company understand the major components involved in getting to the desired end state, including the business risks and costs. It can also help IT leaders more easily develop a series of project recommendations that address the gaps between current and future state, based on the objectives of the company and the goals of the M&A. IT will also be able to create a prioritized roadmap for projects, along with orders of magnitude for costs and benefits.

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[SlideShare] Lions and Mergers and Acquisitions, OH MY! 5 Steps to an Effective M&A Runbook.

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