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    Deal Maker or Breaker

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    PrashantK
    1) The document discusses how information technology is increasingly important for mergers and acquisitions in GCC countries as IT enables competitive advantages and business growth. However, the value of a firm's IT capabilities are often not fully assessed or captured in M&A deals. 2) Investors should evaluate how a target's IT strategy aligns with its growth strategy, where IT investments are directed, what stage of maturity a firm's IT operations are at, and whether IT resources are being effectively leveraged. Conducting a technology diligence assessment can uncover synergies, cost savings, risks, and ensure regulatory compliance. 3) For M&A deals to realize full value, the document argues that technology considerations need to be

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    Deal Maker or Breaker

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    PrashantK
    71 views4 pages
    1) The document discusses how information technology is increasingly important for mergers and acquisitions in GCC countries as IT enables competitive advantages and business growth. However, the value of a firm's IT capabilities are often not fully assessed or captured in M&A deals. 2) Investors should evaluate how a target's IT strategy aligns with its growth strategy, where IT investments are directed, what stage of maturity a firm's IT operations are at, and whether IT resources are being effectively leveraged. Conducting a technology diligence assessment can uncover synergies, cost savings, risks, and ensure regulatory compliance. 3) For M&A deals to realize full value, the document argues that technology considerations need to be

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    1) The document discusses how information technology is increasingly important for mergers and acquisitions in GCC countries as IT enables competitive advantages and business growth. However, the value of a firm's IT capabilities are often not fully assessed or captured in M&A deals. 2) Investors should evaluate how a target's IT strategy aligns with its growth strategy, where IT investments are directed, what stage of maturity a firm's IT operations are at, and whether IT resources are being effectively leveraged. Conducting a technology diligence assessment can uncover synergies, cost savings, risks, and ensure regulatory compliance. 3) For M&A deals to realize full value, the document argues that technology considerations need to be

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    71 views4 pages

    Deal Maker or Breaker

    Uploaded by

    PrashantK
    1) The document discusses how information technology is increasingly important for mergers and acquisitions in GCC countries as IT enables competitive advantages and business growth. However, the value of a firm's IT capabilities are often not fully assessed or captured in M&A deals. 2) Investors should evaluate how a target's IT strategy aligns with its growth strategy, where IT investments are directed, what stage of maturity a firm's IT operations are at, and whether IT resources are being effectively leveraged. Conducting a technology diligence assessment can uncover synergies, cost savings, risks, and ensure regulatory compliance. 3) For M&A deals to realize full value, the document argues that technology considerations need to be

    Copyright:

    © All Rights Reserved
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    of 4

    Deal maker

    or breaker?
    Technology in M&A transactions

    44 | Deloitte | A Middle East Point of View | Spring 2014

    M&A

    For some major companies in the Gulf Cooperation


    Council (GCC) countries, including leading banks and
    financial institutions, information technology (IT) is
    taking a more central role in the business, not only in
    delivering superior performance but also as a source of
    defensible competitive advantage. As GCC firms
    continue to grow through mergers and acquisitions
    (M&A), the requirement to invest in technology-driven
    innovation has increased the prominence and visibility
    of information technology to board-level attention.

    Deloitte | A Middle East Point of View | Spring 2014 | 45

    Yet for many regional investors the inherent value and


    true cost of IT is often not assessed and captured within
    an M&A transaction. This is partly due to the traditional
    perception of IT as a back-office support function, but
    also because the specialist skills required in assessing the
    benefits of IT within a deal context are in rare supply.
    Research by Deloitte1 has found that information
    technology can often be the largest cost category for
    organizations and the biggest enabler of synergies in
    an M&A transaction. Involvement of IT early and
    throughout the merger or acquisition process is often
    critical for effective execution and the subsequent
    realization of benefits.
    What should investors look for?
    Given the inherent value gained through effective
    leverage of IT operations, investors should consider
    the adequacy, benefits and risks of a firms technology
    capabilities to discover any significantly material risks
    and identify inherent value. In the context of a merger
    or acquisition this would include the following:
    How does the target IT strategy align with its growth
    strategy? An investor should expect to see clear
    alignment between firm strategy and the role of
    IT in enabling or supporting implementation.
    Where is the investment in IT being directed? A firms
    project portfolio should be oriented toward innovative
    new products and services (possibly leveraging
    emerging technologies or new service concepts) as
    well as initiatives to improve operational efficiency.

    Involvement of IT early and throughout


    the merger or acquisition process is
    often critical for effective execution and
    the subsequent realization of benefits

    46 | Deloitte | A Middle East Point of View | Spring 2014

    Where is IT on the maturity curve? Are service failures


    or slow response times indicative of systemic
    operational problems and will these likely cause
    integration challenges for the acquirer? Leading
    GCC companies are investing in delivering mature,
    stable IT operations and infrastructure.
    Is IT leveraging resources effectively? In most
    industries, investors would expect to see firms that
    develop IT core competencies or strategic centers of
    excellence as well as leverage third party resources
    and specialist suppliers based on service demand.
    Inclusion of technology diligence for a regional
    acquisition
    For a leading UAE-based investment firm, inclusion
    of technology diligence provided deeper operational
    insight and commercially significant key findings for
    an acquisition target (a regional remittance services
    provider). This included the following:
    Capturing performance upsides, including
    synergy enhancements
    Identification of potential revenue enhancements
    through the adoption of new programs designed to
    provide new business services, along with alternative
    ways in which technology could provide significant
    value such as the development of interfaces between
    internal and third party regional banking applications.
    Accelerating delivery
    This involves an assessment of the current and
    forecast project portfolio, including business case
    reviews, alignment to strategic requirements and
    resource considerations.
    Translating existing and future business requirements
    into viable technical solutions is critical to IT program
    success and ensuring that demands of business users
    are met.

    M&A

    Identifying cost saving initiatives


    Looking at operational and capital IT expenditure to
    determine key trends, performance relative to peers
    of similar size and operations and the key reasons for
    over-investment in IT.
    Providing risk management and control
    Identifying potential risks, issues and dependencies
    that could affect company operations, such as the
    reliance on payment technology services, adequacy
    and oversight of the customer information database.
    Adherence to reputational and regulatory
    requirements
    Assessing the firms adherence to regulatory
    requirements including stringent checks undertaken
    for anti-money laundering and new client acceptance
    procedures as well as recording cross-border payment
    flows.
    Incorporating technology diligence into the
    deal cycle
    As GCC companies continue to grow and operate
    across multiple jurisdictions, there will be an ever
    increasing demand for the IT function to deliver
    innovative new products and services, improve
    operational efficiency and ensure adherence to all
    applicable laws and regulations. This is especially the
    case for companies who operate or have business
    partners in the highly regulated markets of Western
    Europe and North America.
    Moreover, with automation becoming more pervasive
    and critical to business operations, it is imperative for
    investors to include technology considerations early into
    the transaction lifecycle, particularly in the due diligence
    phase. This will help not only avoid potential erosion of
    deal value but also uncover additional opportunities to
    realize operational benefits. For many new companies

    Given the inherent value gained


    through effective leverage of IT
    operations, investors should consider
    the adequacy, benefits and risks of a
    firms technology capabilities to
    discover any significantly material
    risks and identify inherent value
    in the region, such as digital advertisers, online retailers
    (business-to-business and business-to-consumer
    providers), strategic use of information technology feeds
    into their business model and could be the deciding
    factor between deal success and failure.
    Are you thinking about the technology implications for
    your deal? If not, you may not fully realize the value or
    risks in the business being bought or enhanced
    synergies that could be realized.
    by Zaid Selman, manager, transaction services, Deloitte
    Corporate Finance Limited (regulated by the DFSA)

    Endnotes
    1. M&A Information Technology Best Practices, Janice M. RoehlAnderson. September 2013

    Deloitte | A Middle East Point of View | Spring 2014 | 47

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