How Does IT Impact M&A Success?
According to Bain & Company, 2023 M&A activity will be on par with or exceed the level of activity in 2022. Even in the face of an uncertain economic outlook, savvy executives will continue to use M&A activity to bolster their companies. As the report stated, companies that made at least one merger or acquisition during the 2008-2009 downturn earned 120 basis points more in total shareholder returns than companies that were inactive in M&A. Downturns also present a substantial opportunity for industry re-defining deals.
IT is the underpinning of successful mergers. When IT acquisition integration is incomplete, workers suffer from a lack of access to information and reduced collaboration. There’s no shortage of consulting firms offering extensive integration team services to integrate IT organizations and ensure business continuity. They exist because the IT integration process is complex; if done incorrectly, it can strain a merger’s successful integration.
Common problems include:
1 Loss of productivity
Improperly integrated IT systems can lead to significant downtime and loss of productivity. This can result in lost revenue and dissatisfied customers
2 Increased costs
IT integration can be a significant expense, but the costs of not managing it can be even higher. Inefficient processes, duplicated efforts, and other issues can drive up costs and hurt the bottom line. Most networks are riddled with unidentified assets, some of which may need to be replaced.
3 Security risks
If IT systems are not properly integrated, it can expose security vulnerabilities that cybercriminals can exploit. This can result in data breaches, theft of intellectual property, and other security incidents that can harm the company’s reputation and bottom line.
4 Legal and regulatory issues
Mergers can raise legal and regulatory issues, particularly if the companies operate in different countries or industries. Failure to properly manage IT integration can result in regulatory violations, lawsuits, and fines.
What are the toughest IT challenges during a merger?
Smooth integration of IT systems is the foundation of a successful merger. As the backbone of the business, the network is responsible for employee productivity, customer satisfaction, and for many companies, revenue generation. Unfortunately, it’s a highly complex undertaking with many barriers to success.
Network Complexity
On-premises enterprise networks have grown organically over the decades; they can comprise tens of thousands of devices from dozens of vendors running billions of lines of code. According to a 451 Group Pathfinder Report (See It, Fix It, Manage It), cloud complexity is also growing. 59% of enterprises said they are moving toward an integrated multi-cloud IT architecture, while another 20% are moving entirely to the cloud.
Even if the task at hand is integrating a relatively small network into an enterprise environment, It’s still a gargantuan task. Almost every enterprise has documented its on-premises and cloud architecture, but only at a high level. Very few have current documentation of their global topology down to a single device or instance. According to a report on cybersecurity in mergers and acquisitions, over half (53%) of technology leaders say they find unaccounted-for devices after completing the integration of a new acquisition.
Unless you accurately understand the devices on the networks and how those devices are configured, it is impossible to understand the ramifications of connecting them.
Security Risks
According to the above-referenced study, 62% of respondents believe their company faces significant cybersecurity risk when acquiring new companies. The IT team protects the company’s digital assets, manages risk, and ensures regulatory compliance. During an M&A event, this requires assessing the vulnerabilities and ensuring the newly acquired network adheres to the parent company’s security policies.
How can a network digital twin streamline and de-risk IT integration during a merger?
The lack of accurate data is the common thread that ties all network-related M&A challenges together. Forward Enterprise, the most sophisticated network digital twin available, provides engineers with the current and detailed information they need to quickly and safely merge networks.
The Forward Enterprise collector gathers detailed information about all L2-L4 and some L7 devices on the network and cloud instances using read-only network access and commercially available cloud APIs. This information is parsed and normalized to make it accessible and actionable for even the team’s most junior member. The data is used to build visual network topology models, reason all possible paths in the network, create an accurate inventory, and assess vulnerabilities. Furthermore, the platform offers verification checks that enable engineers to ensure the network is compliant and behaving as expected. This detailed data eliminates guesswork during the integration process.
6 Steps to a Successful Post-Merger Integration
STEP 1: Understanding network inventory
Before contemplating joining networks, knowing what devices are in use and their configuration is critical. Unfortunately, most IT departments don’t have a dynamic network inventory; instead, they work from high-level architecture diagrams or out-of-date spreadsheets.
Companies using Forward Enterprise can easily address this challenge using the Network Query Engine (NQE) dynamic inventory tool (see figure 1). NQE’s dynamic inventory enables users to see the network’s granular details (e.g., configurations, state, interfaces, power supply serial number, module firmware rev, etc.). One of the many benefits of NQE is that data collected from multiple vendor devices is normalized so that anyone can interpret it – no need for vendor-specific expertise.
The data collected by Forward effectively creates “Google for your network”; a simple search can locate an IP address, circuit ID, or piece of equipment in seconds.
STEP 2: Understanding network topology
Enterprise topology is rarely understood at a granular level. Most NetOps teams have current architecture diagrams and have a high-level understanding of physical and logical network topology. Details often reside in the organizational wisdom (AKA inside the heads of people who’ve been with the organization for some time).
The notion of interconnecting networks with only high-level topological knowledge is disconcerting. Out of an abundance of caution, the networks are often maintained separately rather than integrated as a security mechanism. This can lead to inefficiency and higher operating costs.
Forward Enterprise provides a visualization of your organization’s entire (L2-L4) hybrid, multi-cloud estate in a single normalized view (see figures 2-4). We collect config and state data from all your on-premises devices, such as routers, switches, load balancers, firewalls, SD-WAN, and virtualization platforms (e.g., VMware NSX and Cisco ACI). And we use publicly available APIs to gather similar read-only information for your various cloud accounts to create a network digital twin.
STEP 5: Check for vulnerabilities
It’s essential to verify that there are no critical vulnerabilities on devices in the new network before integration. Forward Enterprise integrates with the NIST database and vendor databases to identify Common Vulnerabilities and Exposures (CVEs) and compare them against the devices, operating systems, CVE specific configurations, and features in use. This will identify any issues in the new network and provide a prioritized remediation plan. This check runs continuously across the entire network, so SecOps and NetOps teams will always know their risks (see figure 5).
Additionally, integration with vulnerability scanning tools like Rapid7 and Tenable will identify within seconds which end-hosts impacted by critical vulnerabilities can be accessed from the internet or from any user-defined exposure point like a contractor’s VPN and which compromised end-hosts can access internal critical infrastructure, adding another layer of assurance that the new network is not introducing risk (see figures 6 and 7).
STEP 6: Verify zone-to-zone security posture
Network segmentation is the backbone of a security policy. Before merging networks, engineering teams should evaluate the security posture of the new network and ensure that connectivity is as they desire. Doing this manually is time-consuming and labor-intensive. Using the Forward Enterprise platform, they can get a current view of the complex zone-to-zone interactions occurring in the on-prem or multi-cloud network presented in one easy-to-understand visualization. It only takes a glance to see which zones have full, partial, or zero connectivity with color-coded status indicators to represent flow outcomes so that teams can confirm compliance at a glance (see figure 8).
The zone-to-zone connectivity matrix uses color-coded status indicators to represent flow outcomes, enabling teams to confirm compliance at a glance.
GREEN: openly connected | ORANGE: partially connected | GREY: no routing | RED: fully isolated
A digital twin takes the guesswork out of merging networks
As the backbone of the business, IT is a critical dependency for a successful merger. Bringing two networks together is a complex process involving several teams of people. Trying to manually complete the steps laid out above would be a risky, time-consuming, and error-prone process. A digital twin can create a single source of truth that unifies the teams and provides a mathematically correct depiction of both the “home” network and the newly acquired company. Once the process of documenting, visualizing, and verifying the security of the network is started, the platform regularly collects data – ensuring everyone is working from up-to-date information. It’s the only way to visualize your entire global network, including public clouds, in a single screen with the ability to drill down to specific device or instance configurations. This level of detailed data enables the digital twin to discover vulnerabilities and verify security posture to limit risk.
A merger would never happen without due diligence on the financial side; empowering IT teams with the same level of detailed data is critical to ensure their success.
