Tag Archives: merger and acquisition

IT Due Diligence: merger and acquisition discovery process

IT Due Diligence: merger and acquisition discovery process   Our Best Selling e-book
The key to IT success is being able to identify what your team needs to work on. Use the process and tools I developed while conducting over 40 company acquisitions to help you assess any IT support situation.

Tools, examples, and plenty of “how to” discussion provides what you need to conduct a technology assessment efficiently and thoroughly, even a report template to help you organize and present your findings and recommendations.

Table of Contents

Book excerpts


Buy the entire
Practical IT Manager GOLD Series


Transition plan for temporary employees you inherit in a company acquisition

In my last post, I identified there are up to three groups of IT employees you will have in a company acquisition.

The plans for Groups 1 and 3 are straightforward, , , you terminate Group 1 and you try to lock in Group 3 for the long term.

In my next blog post I’ll talk about terminating employees and how to do it professionally so that you minimize risk for the employee and for your company.

In this post, let’s talk about Group 2 – employees you need to help you through the transition efforts of the acquisition but won’t be needed afterward. Once the transition is completed, you plan to terminate this group of employees.

The question is, , , “How do you get employees to help you through transition knowing they will lose their jobs when it is completed?”

What would you do if you were one of these employees, , , what would I do.?

Most likely, we would try to find a new company to work for as soon as possible once we know this is going to happen. Makes perfect sense.

The problem this gives you is that you need this group of employees to support the technologies of the company you have just acquired or maybe help with some of the transition projects your IT team must complete.

When the technologies are migrated and transition is completed, , , you do not need these transition type employees.

You need a transition plan for this group of employees and it has to include incentive for them to help you knowing they will ultimately lose their job.

You might be thinking we could move forward without telling the employees what is going to happen once the transition is completed. Yes, you could try this but the penalties can be severe.

A.  IT people are smart and they ultimately find out, , , when they do, they will leave before you are prepared for them to leave.

B.  I would call this maneuver a bit shady and underhanded, , , handling people or clients this way gets around and damages your company reputation more than you might realize. Taking advantage of others and doing things “one-sided” may help you in the short term but damages you in the long run. In your next acquisition you may find IT employees “running for the hills” as soon as they hear your company name mentioned.

I’ve been involved in over 40 company acquisitions and have faced this challenge many times, , , and one thing I know is that this circumstance is a very delicate issue. Handle it wrong and you lose people prematurely and put your company at risk.

Here is an outline of what I have done that has worked for me:

A.  Develop a transition plan for the group
Put a written plan together that outlines exactly what will happen and when it will happen.

B. Announce the plan to the group
Hold a meeting and give each employee his or her transition plan agreement. Present the outline to the group and explain what you are trying to do to transition the company with their help and to reduce risk for both the company and each of them by obtaining their help.

C. Reinforce the key points with each employee
After the meeting, meet with each employee individually to reinforce what was said in the general meeting, to answer questions, and to  reinforce the need for them to participate in the transition.

Click here to download a sample Transition Letter I’ve used many times.

A few key thoughts

–  There has to be real incentive in the plan to get their help and it has to be tangible, , , otherwise they will tell you they are “on board” until a week later when they come into your office and give you a resignation letter. To get their help, there has to be upside for the employee.

–  I usually built in a 25% of annual salary bonus for transitions taking 3 months or longer. Remember, you are asking people to put their careers on hold, , , they won’t do it if there is no upside, , , and it must be tangible enough to get their attention. Put yourself in their shoes, , , they need certainty and incentive to help you through this phase. Otherwise they will start looking for another employer.

–  The plan needs to have a guarantee of employment through the transition period, , , subject to normal employee performance and conduct. You have to make the employee feel secure in a situation that is very concerning for him.

–  Include outplacement support to help in resume preparation, interview coaching, and maybe even job search help.

–  Provide a Letter from the CIO explaining the reason the employee is leaving the company is because of the acquisition, , , he is just in the wrong place at the time.

–  Be sure you communicate on a regular basis with transition employees. They analyze their situation daily and when they don’t hear from you they get nervous and stressed.

If you handle the situation well there will be upside for the employee who stays with you for a few months to assist in the transition. What you hear when you are successful with this is, “We didn’t like the decision but we appreciated how professionally we were treated and the honesty from the managers who worked with us during this transition.”

Good luck, , , much more detail is included in my book, Acquisition:  IT Assimilation. This and all my books and tools can be found at www.mde.net.

Three types of IT people in a company acquisition

If you work on a company acquisition and have the opportunity to help transition the new company into the parent (acquiring) company, , , congratulations. You are on the right side of the deal.

Completing the deal is the easy part. All the heavy lifting comes after the companies agree to merge, , , now it is time to begin the transition.

Even if your company decides to let the new company operate pretty much “as is”, there will still be transition objectives. At a minimum your company will want one Payroll, Human Resources, Accounting, Accounts Payable and Purchasing functions most likely, , , and probably one e-mail system.

But let’s assume the objective is to eliminate the new company as we see it today and merge everything into the parent company’s operations. This includes all technology platforms and the IT organization.

When you look at the transition effort ahead, the new company you have just acquired has up to three types of IT employees in the IT organization:

Group 1 – No longer needed
This group includes people who are no longer needed either for temporary support, transition project work, or for the long term. You will determine a way to let them go sooner than later.

Group 2 – Transition employees
This is the difficult group. You need these people for only a temporary period of time, , , either to provide ongoing support for the old systems you plan to replace or to help in transition projects. Once the technologies are converted to the parent company’s platform you will terminate them.

Group 3 – Long term keepers
You want these people to be part of your company. They are the thoroughbreds who are capable of doing great things, , , you want them to stay with you.

In my next post I will discuss how you develop an incentive plan for the Group-2 Transition employees so they stick around to help you even knowing they will lose their jobs when the transition is completed.

“Take care of my people and my clients.”

In the 1990’s I was the CIO of a very fast growth company. We grew from $30 million in revenue to $700 million in 5 1/2 years, , , and we did much of it by acquiring other companies.

In all, we acquired over 35 companies, , , that’s an average of 7 new acquisitions a year. We were an acquisition machine.

In one acquisition, we acquired a company who had also been purchasing companies, but they had not done very much to consolidate the companies they bought. Our due diligence showed us we were buying a company that was actually running like 10 separate companies, , , all using different technologies and all in different cities around the US. The only thing standard among them was Payroll, Purchasing and Accounts Payable.

One of the ten entities had a totally different business model than the rest, , , and it did not fit our business model. This company entity provided service bureau services to our competitors, , , something we certainly did not want to continue doing after the parent company was acquired. The other nine entities, , , great, but the one that was different needed to be eliminated.

Because this company entity provided a technology service, it fell on me to handle the closing of the office and the services offered to their clients.

Early into my due diligence, I began sizing up what our transition plan should be and quickly realized that for it to work smoothly I would need the help of the general manager. His name was Dan.

I decided to confide in Dan and seek his help in developing the transition plan, , , a potential risk if he did not handle the information properly.  After all, our plan was to announce to his team the week after the acquisition would be announced that we were going to close their office. That meant 15-20 people would eventually lose their jobs and some number of clients would no longer have the software capabilities they had been using.

There is also big risk to our company if we do not handle such a transition well. Fortunately, our company’s CEO and senior management team operated with the philosophy that if we take care of clients and employees as we acquire companies, , , good things will happen for us. If we don’t we will encounter big problems.

Taking care of clients and employees does not mean continuing to operate a business that does not make sense for our company. Stepping up and making tough decisions is still required, but how we go about implementing these decisions is key.

Back to Dan.

When I confided in Dan what our plans would be and asked for his insight and help in developing a workable transition plan, , , he asked me two questions:

  1. “What are you going to do to protect my clients?”
  2. “What are you doing to support my employees?”

WOW, , , I was impressed by such a mature approach. Most managers in this situation would be focused on themselves. I never heard, “What are you going to do for Dan?”

Dan and I developed the transition plan and after the acquisition was announced we delivered the message we were going to close the office, , , to both Dan’s employees and his clients.

The good news, , , there were no employees who went without work and no clients went out of business. We gave everyone a reasonable amount of time along with transition support and options that helped protect their interests. We took care in how we implemented the decision to close Dan’s business.

Even though the clients were essentially our competitors, , , if we had handled their transition poorly it would have sent a negative message around the niche industry segment we were in and could have caused us many challenges down the road.

Later, I hired Dan to help me assimilate the IT support of the other nine entities purchased in the deal, , , and over time he has become a valued colleague and friend. In fact, our families try to get together once or twice a year and Dan has even traveled to Johannesburg, South Africa with me on two IT Manager Institute trips.

Dan has published a book titled, The Rain. CLICK HERE for details.

In discussions about mergers and acquisitions, I’ve heard Dan say things to the effect that he and his people did not like our decision to close the business at the time but understood it, and the way we handled the transition really helped everyone make the adjustment.

The lesson here is that when you have to make tough decisions, be sure you think through how you take care of clients and employees.