Interview with René Ziegler former Head of IT Strategy and IT for M&A, Novartis

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Jürg Kurmann M&A: Which success factors in M&A have become significantly more important to you as you gained experience?
 

Principally that the IT function is involved already early on. Before I set up the IT M&A function at Novartis, no attention had been given pre-transaction as to what an IT integration means, with corresponding surprises and costs. Because of several surprises at the beginning of my role with IT integration, the most important requirement for me in a transaction is the necessity that both buyers and sellers should know exactly what they have in terms of hardware, software, applications, networks, domains, maintenance contracts, and external service providers. Only then can the integration and the corresponding costs – which, of course, have to be part of the buyer's valuation, be planned. Although it is quite inconceivable, I was always amazed how often the relevant information was not centrally available and had to be onerously established.

What was your most surprising or instructive incident in an M&A project? 

I have always been amazed how much users are attached to their incumbent systems and applications and about their enormous resistance to change against the buyer's naturally desired standardization based on the buyer's systems. For example, in the case of the Novartis Merger, there was a department that still used character-type as the user interface and strongly insisted that a GUI would be impossible for their applications. I then had to escalate up to the global Head of Research to enforce a uniform GUI, which then in practice worked flawlessly in the relevant department.

I was very much surprised when we found 89 email domains (including Gmail, Hotmail, and Yahoo) at an acquisition target. used for corporate and confidential emails. Another big surprise was when we found out from a relatively autonomously managed business unit of a sales project that they had never signed a maintenance contract for their ERP software purchased many years before. Thus, for many years neither functionality updates nor the regular security patches had been installed. The need to bring the system up-to-date was imperative and relevant to the valuation.

What are your key points regarding the IT sector in a transaction to share with buyers and sellers?

1. Make sure before the transaction that you know exactly "what IT assets you have" (hardware, software, applications, networks, license agreements, maintenance contracts, service contracts, domains) and what the transaction partner has.
2. If you are a buyer, proactively deal with "resistance to change" of users, such as conducting information days, but be consistent in enforcing your standards and escalate early enough when blocked by hardcore opposers.
3. Know your current and projected IT costs at all times in order to be safe from any unexpected costs that may be incurred by the buyer or the seller to establish the required condition, according to the risk allocation between the parties.
4. Define at the latest at the beginning of a Due Diligence an IT specific sub-project with clear responsibilities, activities, and timelines until the completion of the integration.