The growth of the M&A market has accelerated at a record pace over the past 3 years, driven by a variety of factors. While the practice of M&A has been a staple over the years, emerging and newly established technology trends such as the cloud computing phenomenon have come to redefine how organizations approach the requisite technology separation or integration that have been part and parcel of these transactions.
Because M&A is time constrained – typically fast moving and directly tied to time-sensitive business outcomes (synergies, IPOs to drive market value) – acceleration is a critical success driver in many of these transactions.
The standard cloud adoption approach (cloud transformation) requires significant business alignment, effort and resources that may risk typical M&A accelerated timelines. M&A transactions can, however, still benefit from using cloud as an accelerator for incremental steps in the modernization journey, instead of the standard cloud adoption approach.
The following sections outline the 3 key guiding principles of cloud as an M&A accelerator, distilled from our experience with multiple M&A transactions.
- Cloud first – as target hosting platform
An early decision that needs to be made during the MD&A transaction is the target hosting environments for the new divested or new integrated applications.
Consider cloud opportunities to accelerate the M&A transaction
The cloud, which encompasses different types of platform solutions, can provide several benefits that can significantly help with speed in a M&A time-constrained project, for example:
- Rapid infrastructure provisioning in Infrastructure as a Service (IaaS) can enable rapid lift and shift migrations where there is not enough time to transform.
- Infrastructure scalability and flexibility in instances where infrastructure capacity sizing is not clearly projected upfront, and re-sizing might be required down the road. The limitless capacity in the cloud consumed as a utility (on-demand) can help alleviate the capacity sizing and procurement process that typically takes significant time.
- Access to new cloud-based platform and software services – such as PaaS and SaaS -further abstracts the infrastructure requirements and further enabling speed
In addition, cloud mature organizations can enjoy other benefits beyond the M&A transaction acceleration, including additional business capabilities, agility, innovation, and efficiencies. However, even organizations that are not as mature can still leverage the cloud to accelerate their infrastructure migration as lift and shift where feasible.
Map the application landscape cloud readiness
It is recommended to start with a tailored M&A cloud suitability assessment that will help evaluate the technical feasibility options for cloud migration. This assessment evaluates applications readiness in three aspects:
- Lift and shift readiness: Technical feasibility and effort required to migrate the applications as is.
- Application teams’ preferences: How amenable are the application stakeholders to cloud adoption where technical feasibility has been determined (Some teams may still prefer to not move them to the cloud for strategic reasons)?
- Requirements for migration: Indicating if these are improvements over the current configuration or not.
- Cloud fast – not necessarily cloud native
The second major question for IT leadership during the M&A planning is the scale of technology transformation to pursue when using cloud as M&A accelerator.
Minimize transformation efforts
Given the hard constraints of the time required for M&A transactions, where the inability to complete separations or integrations have real financial downsides, the priority must be to minimize the technology risk. Whenever there is a choice between a cloud fast (“as is”) migration and a cloud native transformation, choose cloud fast.
- Cloud lift and shift migration is preferable: This may carry some inefficiencies but will accommodate what is required. This includes tool based and manual L&S migrations.
- Embark on SaaS transformations only with a full assurance and commitment from the SaaS partner but plan for contingencies.
- “As-is” on-prem migrations are a third preference: Consider also on-prem fast migration for the M&A project to reduce the technology risk.
Extend current enterprise standards into the cloud rather than adopting new standards
Since the applications are being migrated to the cloud without or with minimal transformation, the opportunity to adopt new cloud native solutions can be limited. Some of the cloud native solutions for monitoring, security, load-balancing, backup, or DR may require not only additional changes in the applications itself, but also the development of internal capabilities that can stress the organization.
We recommend against rushing the modernization of mature infrastructure capabilities that are part of the eco-system around which the application have also evolved.
Adapt your existing operating model – do not adopt a new cloud op model
One of the most important consequences of an M&A transaction is that the organizations are going to change. New talent will be hired, departments will be consolidated, and processes will change to suit the new permanent of temporal business landscapes.
There is, however, the need to accommodate for the operation of the infrastructure of the migrated applications, new or expanded capacity in cloud, network, security, etc. To accommodate for the changes needed, we recommend extending the current operation models and teams to accommodate for these new environments rather that create new ones.
- Cloud smart
The final piece in the IT executive’s decision-making process is the alignment and confidence in the whole picture of the cloud as an M&A accelerator approach.
Consider this a step in the overall cloud adoption journey
For M&A transactions we will use the cloud as an accelerator; however, this should not be a disconnected step but part of the larger cloud adoption journey. The cloud adoption journey is an inclusive business endeavor that requires a larger business alignment, and we can help bridging this future alignment by:
- Mapping current adoption maturity in the cloud journey.
- Communicating the overall direction and plan to the business.
- Aligning business expectations with progressive evolution that achieves tactical M&A goals but positions for the long run.
Be prepared to create additional post transaction synergies
Since minimal transformation has been implemented, we must recognize that that are opportunities for some inefficiencies in the cloud. Applications have been migrated as is, not using. Some opportunities to consider are:
- Right-sizing of cloud resources and licenses.
- Transformation to cloud native architectures and services.
- Internal development of cloud capabilities.
Align with stakeholders in the cloud as M&A accelerator approach
It is important to gain stakeholder confidence from the beginning of the project by aligning on these guiding principles:
- Cloud can help achieve the same as on-prem, faster, and with more flexibility.
- Not changing too many things too fast means less risk on the project.
- Replication or extension of current business, operating models and standards are the safer path of the project.
- The plan to work on the opportunities after executing the cloud as an M&A accelerator.
The cloud is one of the major technology accelerators that can be used to enable the integration or separation required in M&A. These M&A transactions are time-constrained, typically fast moving and directly tied to business outcome goals. Acceleration through the cloud can be a critical success driver in these transactions. The standard cloud adoption approach (cloud transformation) requires significant business alignment, effort and resources that may risk the M&A objectives. Instead, M&A transactions can benefit from using cloud as an accelerator of incremental steps in the modernization journey for quick and tangible results.
Ade joined Infosys Consulting in 2014 as part of the CIO Advisory practice in the North America Region. He has over 20 years of experience in delivering large-scale Technology transformation programs and providing technology advisory services primarily in the areas of Cloud Adoption, Infrastructure, Mergers, Acquisitions and Divestitures across multiple industries. He currently leads the Infrastructure and Cloud adoption team on a Major Pharmaceutical client’s Divestiture.
Guillermo has 20 years of experience as technology strategist with a focus on IT infrastructure, IT finance, FinOps and technology operations. Has run multiyear infrastructure and IT finance transformation programs for top telco and media corporations in Europe, and Latin America. Has also consulted on cloud adoption and infrastructure strategy for multinational corporations in diverse industries. Guillermo holds an MBA from Wharton School of Business and an Informatics Engineering degree from the Universidad Catolica of Peru.