Mergers and IT – happily ever after?
Mergers are increasingly common amongst law firms internationally and the UK is no exception. One source indicates that there were sixteen mergers affecting the UK top 100 firms in 2017 with a further four in the first quarter of 2018. There will of course have been many more amongst the mid-tier firms. So, what happens if you find yourself subject to a merger – what will be the impact on your IT and how can IT assist with the process?
It is important to consider the reasons behind the merger. Of course, there are probably as many reasons for mergers as there are mergers but some of the most common factors are likely to be a drive for either expansion or outright survival. It is highly unlikely that an in-depth analysis of the IT currently in use at either firm will have been undertaken when considering the business reasons for the merger. However, unforeseen IT complications or costs can de-rail an otherwise appealing merger. For example, long-term contracts for network connections or software can have significant penalty clauses. As such, it may prove to be challenging to merge systems or data and users of both or either firm may find it difficult to adapt to using unfamiliar systems.
Achieving the operational efficiencies, which are often a driver for merger, can lead to several complications such as a need to rationalise several systems designed for the same purpose, complexity when trying to merge data and an increase in the overall number of IT suppliers and contacts (and staff). These are complex situations which can take time to resolve.
Further impact arises from the fact that mergers are usually by nature very secretive business decisions. As such, it is not an uncommon situation to find that the IT Director / Head of IT has not been involved in the process from an early stage and it is not at all unusual for them to not be told until the merger has been agreed. This often results in the need for IT to react at very short notice with no opportunity for advanced planning. This alone will put extra pressure on the IT team. However, combine this with the fact that they are likely to already be fully committed to other projects at the point of being informed and the result will be a very over-stretched team. For all the above reasons it is common to find that the IT team is suddenly landed with a raft of new projects with very little time in which to plan or complete them. At this point the choice is either to burn the midnight oil, neglect other projects or find extra resource. Mergers are also a very unsettling time for law firm support teams as it is well understood that there will likely be reductions in staffing levels in the combined firm. This pressure on top of the workload can lead to an extremely fraught situation.
It is important to remember that a typical driver for a merger is to reduce overall costs, at least when measured as a percentage of the newly formed firm’s combined revenue. Information technology can play a crucial role in assisting with such cost reductions in two ways. The first one is directly in terms of IT cost reductions. Examples of this include the reduction in connection costs if offices are combined, the removal of duplicated systems, the simplification of IT supplier contracts and maintenance agreements and a reduction in overall IT headcount. The second is indirectly by assisting with efficiencies elsewhere in the firm. Examples of this include assisting with office consolidations, helping to combine disparate business processes and training staff in new ways of working. Of course, the sooner this work can begin the sooner the savings can be made, and the benefits of the merger be realised. The most significant value that a functional IT team can play in the merged firm is to ensure that the systems reflect the need of the new entity and that there are common working practices in all areas of the firm. Sadly, with the pressure of the merger this more strategic thinking is often done too late.
The following recommendations should assist merging firms by helping them to involve IT to get the very best results for the combined firm:
- Treat your lead IT staff as trusted partners and involve them in the process as early as possible. After all, the IT professionals are the trusted guardian of the firm’s data, probably it’s second most valuable resource.
- As with other parts of the business, consider the synergies (or lack of them) between the two firm’s IT systems when contemplating a merger.
- Have a detailed plan for the IT aspects of the merger and work this into the overall merger schedule.
- Understand that the IT team may need to put other projects on hold temporarily and help to communicate these changes to the firm.
- Consider whether your IT team will require extra resource to undertake a successful merger.
- Remember that the merger will not be complete on the day the deal is done. There will be many long-term projects which will require planning and financial support before all the benefits of the merger can be realised.
- Accept and plan for the fact that in the short to medium term IT costs may have to increase in those cases where additional resource is required to merge or replace systems.
- Use the merger as an opportunity to review the merged firm’s IT strategy and to form the basis for a successful future together.