Evaluating technology within mergers and acquisitions (M&A) strategies

We previously explored how the wealth management industry has seen increased consolidation through mergers and acquisitions. Companies have traditionally used M&A to grow within existing markets but today firms are also using it as an opportunity to diversify and modernise. Technology drivers—such as new technological advances, digitisation and new generations of customers and colleagues—can also be the areas where we see the greatest change friction.

Here are three key questions and challenges to think about when considering technology in M&A. 

Question 1: How early on should technology infrastructure and integration be considered in the overall M&A strategy? 

It’s imperative that the two parties consider their unique technology systems and crucially develop an integrated system where some fundamental questions will need to be asked and answered before tackling timelines.

Early on in the discussion, companies will want to explore a variety of questions, such as: 

•    Will each company continue to use their own platforms? 
•    Will the strategy mandate a consolidation into one system?

The approach to these answers, broadly speaking, can be seen through the lens of whether or not two or more unique brands will continue as separate entities or whether the deal has been executed with an eye towards future revenue growth.

Moreover, a merger or acquisition can serve as a natural impetus to finally leave legacy systems behind and adopt a modern technology infrastructure. As these questions are being answered, the timeline for the deal and its budget will be key factors in determining the outcome of these questions and the way in which systems are integrated.

Question 2: How will the new organisation manage technology integration? 

Managing the integration of distinct technology ecosystems can be a serious challenge. If not handled properly, the integration can erode the value of the original deal. Getting buy-in from senior leadership, setting up a framework, and having good governance will help mitigate risks of a flawed execution.

Critically, it can be time and resource intensive. It’s important to assess honestly if you and your team have the right structure in place - including internal and external resources – to accommodate the roles and responsibilities necessary to integrate systems while continuing business as usual.

Question 3: What are the three areas of due diligence that an organisation needs to consider on technology before moving forward on any M&A deal? 

A significant part of the success of any M&A deal rests on pre-deal due diligence. It is here that both organisations must ask the critical questions necessary to make the deal a success. Consider questions, such as: 
•    Will the organisation have local or global frameworks? 
•    How will the data be used and collected in our systems? 
•    Are there any disparate systems that the organisation needs to be made aware of and how accessible are the data? 
•    Are any of the data incorrect or missing?

Creating a pre-deal due diligence checklist that answers these questions will help determine what sort of technology is needed and best fits the needs of the overall strategy, including reporting obligations and regulatory standards.
 

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