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IT-Post Merger Integration: Pre Day 1 Preparation

IT-Post Merger Integration: Pre Day 1 Preparation

Key challenges and success factors when preparing for a large scale Post Merger Integration (PMI) in IT

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Partner, CIO Advisory - Digital Strategy

KPMG AG Wirtschaftsprüfungsgesellschaft

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Pre-Day 1 preparation of IT is key for the success of a PMI and to deliver the integration on budget, quality, and time. IT integration is the enabler for overall integration and a bottleneck for many synergy-realization activities on the business. Also, IT project costs amount to 20% to 30% of the integration costs, compared to the small share IT run costs account for in the line organization (usually 1.8% to 3.5% of EBITDA). We have identified critical challenges and key success factors for IT in the pre-day 1 phase of an integration to ensure a well-planned Day 1 and achieve synergy targets, business continuity, and a future ready technology.

The most critical challenges in defining your target state before Day 1 are:

  • Having a clear plan on how to “keep the lights on” at Day 1
  • A common vision of the future IT needs to be shared by the IT and business Top-Management
  • IT needs to maximize both IT and business synergies while minimizing the integration project costs
  • To ensure a PMI and it´s sub-programs run streamlined, a rigorous and centrally driven management of key issues, needs to be in place
  • Key talent mostly leaves companies before the Day 1. Thus effective retention measures and communication need to take place as a priority when preparing for Day 1

In order to address these critical challenges, we have identified six key success factors across different industries during our engagements supporting major integration projects. 

1st Day 1 lock down
Ensure that business continuity is guaranteed at Day 1 by focusing on four key topics: Collaboration, Workplace, Applications, and Organizational readiness

2nd Operating Model
Designing the Target Operating Model (TOM) and planning out the transition is key to ensure the program follows the new strategy and is a major enabler of project progress and synergy realization. Therefore it is important to ‘get right’ the organizational structure, governance, and key new processes of the TOM and align early with change management.

3rd Concept detailing for Talent retention post day 1
Since one of the major challenges is the retention of key resources, a comprehensive and early talent retention plan needs to be elaborated early on in the program and continue throughout the implementation. In particular industry-specific digital experts, such as data scientist need to be retained.

4th Develop an IT Assumption Based Target State (ABTS)
As IT needs to enable the new business and its processes, IT needs to become the driver in defining early on a Target State, based on assumptions, in close alignment with the business. 

5th Follow a proactive and agile approach for Synergy Realization
In order to react to rapidly changing regulatory and business requirements, and the complexity involved when estimating costs, it is important for IT to establish an approach to prioritize their projects and adapt as needed. Shortly before day 1/ around day 1

6th Alignment with IT Line Organizations
During the course of a PMI, some decisions will have a direct impact on the overall strategy of group wide functions and ongoing projects, which are not directly related to the integration. For that purpose, ensuring the buy-in of major decisions from the line organization is key to ensure continuity. 

The success of a PMI also depends on having a competent team on board to navigate through the challenges ahead. 

If you are further interested in this topic, please contact us. 

 

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