Using ITIL® During Mergers and Aquisitions

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1. Introduction

The level of Mergers and Acquisitions (M&A) activity over the last two years is three times the level it was during the dotcom boom. From an organisational viewpoint there is net value for M&A, as organisations wish to “transform the business” (TTB) through the combination of core processes. IT is seen as representing 20% of the benefit of M&A, and as a result, as leaders in the IT industry, we must make it as successful as possible. ITIL® service management provides best practices associated with the development and delivery of end-to-end business services as well as technology. We can utilise many of the processes covered within ITIL® as we move M&A through initial integration to a joint working practice.
Organizations that adopt ITIL can realise business benefit through improvements in efficiency and effectiveness. By adopting a true service-centric approach, transparency is brought to the relationship between IT and the business, which is ultimately the goal for IT service management. This can be useful during M&A, albeit that in the first instance there may be little time for planning due to the sensitive nature of M&A, or even that IT has not been involved during any due diligence process.

2. ITIL’s role in delivering value and business benefit

ITIL service management is a recognised professional best practice supported by an extensive body of knowledge, experience and skills. It is also a best practice framework for the provisioning of business and IT services to unite all teams toward a single aim: that of delivering business value.

ITIL focuses on recognising what each IT service brings, in terms of its value and business benefit. IT must challenge itself to check that it is providing services that each business needs in order to meet its own challenges. It enables organizations to understand the role that IT plays on behalf of the business for sustained success.

3. Using ITIL® for Mergers and Acquisitions

ITIL® best practices can be used when IT needs to get involved in a M&A activity.

Initially it will be appropriate to view the combining business to assess the types of services provided: are there any common services, are there merging of skills and competencies, are locations coming together?

Senior IT executives should evaluate the cost effectiveness of each service. ITIL® enables organizations to do this in a systematic way by analysing the services against the desired business outcomes during a M&A activity.
To sustain high levels of business performance, organisations need to offer competitive products and services that customers will value. This does not change during the M&A – adapting quickly to changes in the economic climate and in the market place will be critical to success. Adopting a structured approach helps to avoid the common mistake of using the services hosted by the larger stakeholder in the M&A – this is not necessarily best for the new emerging business!

M&A transformations can be supported through the use of the ITIL Service Lifecycle approach. The ITIL® service lifecycle has five distinct stages. Each stage of the lifecycle relies on service principles, processes, roles and performance measures. A constant set of checks and balances throughout the service lifecycle ensures that as the M&A transformation progresses, the services can adapt and respond effectively.

Service Strategy

This stage is at the core of the Service Lifecycle: we concentrate on ensuring that our strategy to deliver the M&A transformation is defined, maintained and implemented. Within the initial integration of the M&A activity, Service Strategy evaluates whether each service will add value to the new organisation and whether it is still appropriate as the organisation changes. There are likely to be new constraints, such as new corporate governance requirements, legislation, cultural or cost constraints. Service Strategy focuses on enabling practical decision making, based on a sound understanding of the services, with the ultimate aim of increasing the economic life of the appropriate services It ensures that IT is in a position to handle the costs and risks associated with the emerging portfolio of services.

Service Design

With transformation requirements identified, Service Design is then able to focus on converting the strategy into reality, through the use of a consistent approach to the design and development of new service offerings. It will be necessary to view the merging services in areas such as consistency of a common architecture, understanding and translating any new business requirements, and introducing the appropriate support requirements upon implementation of the M&A. It may also be necessary to increase or maintain additional value to customers during the integration period, but, at the very least, ensure continuity of each service as the transition takes place. There will undoubtedly be pressure on maintaining existing service levels.

Service Transition

As the design and development activities are completed the changes will need to be managed. This is done through the lifecycle stage of Service Transition: any change carries risk to the organisation, whether it be a small bug fix or a significant IT project, and a M&A activity has even more intensity. Service Transition represents the key stage of the service lifecycle to protect the changes that are going into live service to ensure minimal unpredicted impact on the business. The Service Transition stage brings together all the assets within a service to ensure they are integrated and tested together. Its focus is on the quality and control of the delivery of a new or changed service into operations. There will usually be limited time within the M&A integration so quality effort to this stage of the lifecycle will reduce unexpected variations in delivery of the live services.

Service Operation

Importantly, the area having greatest visibility during a M&A process will be the day to day support services, without doubt the largest resource burden (often representing 60 to 75% of the cost of IT). There must be sound end-to-end practices which can support responsive and stable services. Service Operation teams strongly influence how the business perceives the service it receives. The Service Desk can be used as the focal point during the M&A activity as they directly own and support incident management through the support of any user issues, requests and feedback. Reporting service performance and the achievement of service level targets are important indicators of IT’s success in delivering the evolving business outcomes.

Continual Service Improvement

Finally, after implementation of the M&A change, a check and balance on whether the change had the required impact on the business objectives is required. Continual Service Improvement works with the other four stages of the service lifecycle to realign the services with the business needs. Perfection will certainly not be reached at the initial phase of M&A integration. Therefore, Continual Service Improvement must provide a vehicle for recognising further improvement opportunities and change. Where there are any significant gaps in service during the initial stages, these can be focussed on as a priority to mitigate any significant risks.

For more information on how ITIL can help organisations through a Mergers and Acquisitions activity, contact us to download the full article.
For specific training related to help with a Mergers and Acquisitions activity review our courses on Service Strategy, Service Design, and Service Transition