White Paper

How Financial Firms Can Smooth the IT Transition in Mergers and Acquisitions

As business leaders move through the process of a deal, they must maintain focus on their objectives.
September 09, 2019

Merger and acquisition activity has become commonplace in the financial sector in recent years, and many financial firms are continuing to explore potential deals to partner with or absorb complementary institutions.

To successfully complete a merger or acquisition, business leaders should approach each step of the process with cautious optimism, looking for potential pitfalls or challenges, and then working to find ways to overcome them.

The M&A process is made up of three distinct stages: the vision phase, the due diligence phase and the integration phase. During each stage, business leaders must take steps to ensure that the deal will achieve its objectives. Savvy business leaders will make technology integration a top priority at each stage of the M&A process.


The percentage of organizations that rank technology acquisition as the most important aspect of their M&A strategy

Source: Deloitte, “The State of the Deal: M&A Trends 2019,” (PDF) January 2019

1. The Vision Phase

The vision phase is like the dating stage of a relationship: It’s filled with excitement about the possibilities ahead, but both parties are also looking for signs that point to whether their potential partner is a good long-term match. In fact, much of the activity at this stage resembles literal dating, with firm leaders going out for drinks with one another to discuss their visions of the future. 

These early conversations are likely to revolve primarily around the strategic drivers behind a potential merger or acquisition, including factors such as expansion into new territory or the addition of a new service or product offering. But business leaders also begin to discuss major logistical considerations — including human resources, capital assets and potential deal finances — during the vision phase. Technology should absolutely be a part of these conversations. Even if an M&A deal isn’t centered on fintech, the eventual integration of IT systems will be a major part of bringing the two companies together. While not every aspect of IT must be hashed out during the vision phase, business and IT leaders should discuss any systems that enable business-critical tasks. 

Security and compliance should also be discussed during the vision phase. In deals where one organization operates in a more restrictive compliance environment than the other, both parties will likely need to eventually meet the more conservative standard.

2. The Due Diligence Phase

If the early envisioning around an M&A deal is a courtship, then the due diligence phase is the engagement period. Both parties are serious about entering into a lasting partnership, and they are working hard to ensure that the union will be a success. During this stage of the M&A process, the acquiring company should develop a deep understanding of the organization it will be taking over, including that organization’s existing technologies. 

Business leaders should consider what will need to change about each organization’s IT environment, what will stay the same and what resources are necessary to drive innovation and transformation in the future. Additionally, IT leaders should be heavily involved during the due diligence phase, as organizations should use this time to get into the details of complex subjects, such as software licensing agreements and the mix of public cloud and on-premises resources. 

3. The Integration Phase

Here, the marriage begins. At this stage, the acquiring firm should develop a comprehensive strategy that charts a path between the organizations’ current IT states and where company leaders want the new organization to go in the future. The integration phase requires IT teams to integrate systems, hammer out the details of compliance issues and communicate effectively with employees. 

In addition to IT management and top executives, the integration phase ideally should include rank-and-file employees. These workers, including both technicians and day-to-day users of IT systems, often have a different (and sometimes better) understanding of how technology actually works within an organization than leaders do. Line-of-business leaders from departments such as human resources, marketing and legal should also be represented. 

Important considerations for IT integration include: 

  • Inventory: Organizations should have visibility into all existing hardware and software assets. 
  • Site surveys: By visiting physical sites and remotely surveying virtual environments, integration teams can verify reported inventory and identify potential problems (such as lax physical security for sensitive digital assets). 
  • Security assessments and integration: Engagements such as vulnerability assessments and penetration testing can uncover potential cybersecurity gaps and verify regulatory compliance. 
  • Network assessments and integration: Integration teams must assess existing networks and determine the best path for eventually combining networking infrastructure without disrupting application performance. 
  • Data center operations: It’s important for integration teams to understand how each organization manages data center infrastructure. Some job roles may be changed to improve efficiency and make the best use of internal talent. 
  • Migration of apps and data: In some cases, it may take a year or more to integrate apps and data. This process should not be rushed.  
  • Field resources: Integration teams must understand which people and infrastructure are located outside of headquarters or branch offices, as well as how they’re connected to the business and IT.
  • Vendors and partners: Organizations may end relationships with certain suppliers, or use their new scale to negotiate more favorable agreements.

To learn more about how financial organizations can effectively manage mergers and acquisitions, read the CDW white paper “Managing the IT Challenges of M&As in the Finance Industry.”