Mergers and acquisitions (M&A) form a key part of many growth strategies. As a result, every M&A deal is high stakes, with due diligence and rigor essential to mitigate risk and maximize value. The utmost priority is a smooth IT transition, to get all users of systems and applications working without interruption, and the merged company on its way to realizing value. M&A IT integrations are traditionally perceived to be difficult, but they needn’t be—because the right technology approach can speed up activities by removing complexity whilst safeguarding the user experience.
The low cost of cash and the expansion aspirations of companies that recognize acquisitions as a fast route to growth have contributed to a thriving M&A market. So much so that 2021 witnessed a reported 62,000 deals at a total deal value of $5.1 trillion. High activity levels are likely to continue this year too; in a Deloitte M&A trends survey released in January, 92 percent of executives said they expect deal volume to increase or stay the same over the next 12 months.
The challenges of M&A
Zscaler’s conversations with companies undergoing M&A reveal a range of challenges including time to value, risk and compliance, and value capture. It is a board-level concern that the business realizes its return on M&A investment as quickly as possible. However, this is challenging to deliver because essential activities that include due diligence and integration planning take time to execute.
IT must consolidate complex, legacy networks and security infrastructure while connecting users and standardizing IT monitoring and controls. Users need to be connected—with the right profile and access—to all necessary systems and applications as quickly as possible for day-to-day operation of the business. With limited time, many deals wind up failing.
Additionally, risk is a huge challenge in M&As, as the acquirer assumes all threats and vulnerabilities, together with the cost of remediation. If security threats are not identified and mitigated early, subsequent breaches can cause catastrophic financial and reputational damage and potentially negate deal value. Deal value has eroded in recent times due to inherited poor security postures and their associated risks that threaten the timeline and cost to achieve planned synergies. Furthermore, the complexities with on- and off-premises applications, customer globalization, global supply chains, and global service delivery can quickly impede any inorganic growth to resolutely act upon its opportunities.
Many deals hinge on synergy savings, which are important drivers of success. However, capturing this value can be elusive. According to one PwC report, 83 percent of successful deal makers realize their synergy expectations, while only 47 percent of unsuccessful ones do.
A traditional vs. modern M&A approach
Merging companies should pursue an IT integration approach that drives out costs, reduces risks, increases time to value, and simplifies operations. The traditional M&A approach requires significant upfront planning, investment, and effort to achieve sub-par results with respect to risk management and efficient user access. It involves a significant investment of time in risk profiling and connectivity and access, with limited amounts of these activities running concurrently. Modern, cloud-based security services instead enable IT to work fast as part of M&A activities to improve the user experience and secure access to applications.
A modern approach makes a quantum leap forward in time and effort efficiency while maintaining or elevating risk posture and easing the user experience during integration. It reduces the length of time required for risk profiling and connectivity and access, with the majority of these activities able to run at the same time.
Zscaler brings speed to M&A integrations…
IT integration is not a valued effort in itself within M&A, it is just a means to an end. The sooner businesses can get past it, the more value they will get out of the newly-integrated business capabilities. Zscaler's cloud-native approach reduces the integration and separation timeline to achieve planned value within weeks, versus months or even years, which has become the expected norm.
A cloud-based security service such as the Zscaler Zero Trust Exchange enables IT to work fast as part of M&A activities to improve the user experience and secure access to applications, utilizing the internet as the backbone of connectivity for all corporate assets. The user has a single experience because there is no VPN nor on/off network differentiation. It is a demand-based model, with network and security functions leveraging scalable cloud service capabilities that only require administration and operations to plan and run. This changes the game for IT integrations, reducing deployment time while minimizing risk and simplifying operations.
…accelerating the time to achieve deal value
Secure connections for users to any app, anywhere, at any time safeguards the user experience while expediting time to value and mitigating risk. Part of the modernized M&A playbook is to integrate only what is needed, deploy a simplified and secure access solution, and move rapidly to planned value capture opportunities. That way, users can continue to collaborate, manage operations, execute business strategies, and innovate. The time and effort required to connect users is more easily predicted due to simplified access and removed external dependencies, while synergy savings and benefits are realized sooner.
As information security needs to support the business, IT needs to work in alignment with the C-Level team in charge of M&A, and therefore be brought into discussions early. The new role of the CIO as enabler of digitized enterprises is underlining the strategic function of IT that has the potential to support M&A successfully as well. Find out how to accelerate your next M&A, take a look at Zscaler solutions for M&A and Divestitures.