On the one hand, deal theses underline the need for operational efficiencies and excellence. On the other hand, they bring change that can be jarring — especially for leaders of a newly acquired organization, who rightly believe their successes got them to the point of acquisition.
Robert Sheesley, CIO of Wrench Group, and RKON CEO, Jeff Mullarkey, recently discussed the difficulties in change management in these situations, as well as some ways to address cultural assimilation and ensure a smoother deal transition.
Sheesley has seen his share of IT modernization projects, having worked for several large consulting firms where he worked on M&A due diligence and post-deal IT integrations. A great deal of his experience has been hands-on with Wrench Group, which has made 18 acquisitions since he joined the company.
One of the most significant change-management challenges in these situations, Sheesley said, is the necessary cultural paradigm shift: “The cultural assimilation aspect is extremely important. You don’t want to disrupt the autonomy that has made the acquired brand successful.”
Steps toward assimilation
A healthy union of two entities requires the avoidance of fractured IT decision making, which can stymie digital transformation and innovation.
Based on his own experiences, Sheesley has had success by taking a consultative approach to consolidating IT environments, rather than a static, locked-down strategy. If possible, that strategy should be embedded early.
“If possible, the due diligence period should include an assessment of cultural synergies and what the assimilation process looks like, which allows you to plant seeds along the way,” Sheesley said.
He also suggested ensuring that management and IT leadership understand the value proposition of having a scalable IT infrastructure — in other words, answering the question: Why?
“Show leaders of the acquired company what is possible,” Sheesley said. “For example, it can make people nervous when you start talking about infrastructure in the cloud or outsourcing the help desk. Slow walk that and show evidence of previous successes, why it works.”
Next, help IT staff in the newly acquired company realize that there is value for the company and for them to give up some IT control. Cultivate a consultative mindset within them.
“Create exponential value for them by taking off some of the pressure in certain competencies like cybersecurity or infrastructure management or Tier 1 help-desk management,” he said. The goal is to help them understand low-value versus high-value IT activities, and adding time back into their day to do more high-value work.
Sometimes that means nurturing employees who have shown an interest in personal growth, even if they don’t have technology experience. Sheesley gave an example of a young man whose company was acquired by Wrench Group. “He was a plumber, but was interested in IT and informally troubleshooting tech incidents. Given some formal training, the man is “now one of our best field IT people,” Sheesley said.
Cultural assimilation is multi-faceted and should not be overlooked in private equity deals. By taking a “do no harm” approach and incorporating a consultative approach, everyone involved can share in the deal’s value.
Listen to the full conversation between Jeff and Robert here, which includes thought leadership and guidance around gaining IT maturity, digital transformation, cultural assimilation in M&As, and much more. Meanwhile, if you have any questions, please reach out to us.