By Marco Roodt, Business Strategist at Marval SA
The cornerstone of the South African Merger and Acquisition (M&A) legislative framework is the new Companies Act 2008 (‘the New Companies Act’), which was promulgated in 2008 and became effective on May 1, 2011.
This Act significantly overhauls the existing Corporate Law regime and has various implications for M&As. The Information Technology Infrastructure Library (ITIL) best practice framework can ease the challenges associated with M&As, however.
As South Africa recovers from the economic downturn, M&A activity is expected to increase. To enhance opportunity for success, companies entering these transactions need to temper the typically dominant focus on legal and financial aspects with attention to elements of integration and continual improvement. This is especially important given the challenges the new Companies Act 2008 presents to newly wedded entities in terms of living up to promises made to company stakeholders at the time of merging.
“Introducing ITIL best practices can assist these organisations to live up to those promises, and demonstrate their willingness to deliver best service and adapt to new stakeholder expectations,” explains Marco Roodt, Business Strategist at Marval SA, a provider of IT Service Management (ITSM) solutions and services:
“The New Companies Act 2008 and King III have raised the bar for legal and governance requirements, essentially improving transparency. The flow of constant, accurate and timely information is key to this new standard and impacts all business activities. King III has to this end devoted a complete chapter to IT-Governance. Essentially this chapter places Information Technology (IT) at the heart of the company allowing IT to become a cornerstone of the business. To ensure regulatory requirements are met and chances of success are optimised in an M&A transaction, a clear overall M&A integration process is necessary – and ITIL facilitates optimised execution of that process.”
The M&A integration process is linear with four logical core phases and myriad sub-phases, notes Roodt.
. Phase 1 starts with a decision to take the company into a new direction.
The strategic intent is typically to grow the company by means of vertical or horizontal integration.
. Phase 2 comprises a due diligence exercise to ascertain the company’s strengths, weaknesses, opportunities and threats from every legal, financial and operational angle. Once a clear picture has emerged, a legal exercise (memorandum of agreement), prospectus and deal announcement follow.
. Phase 3 will see a team of experts and decision makers appointed to form the integration/transition team. This team will decide on an integration strategy, which should include integration targets and outcomes, benchmarking and tracking, reviews and continuous improvement.
. Phase 4 focuses on renewal and continual improvement. Only by making the required information available is this possible.
Says Roodt: “Integration is core to strengthening the probability of a successful M&A. The challenge is to merge once separate companies into a single successful entity where the leaders and employees share a common vision, purpose (mission), values, strategy, organisational structure, leadership style and culture (new business behaviour), expectations, standards and goals.
“In addition, well defined service strategies and continual service improvement are vital, especially for merged organisations that focus on service delivery. Introducing ITIL can in this instance be particularly useful as customer value can be created and maintained through better design, introduction and operation of IT services.”
Information Technology Infrastructure Library (ITIL) a best practice framework, provides the guidance necessary for an integrated approach as required by the ISO/IEC 20000 standard. World-class merged companies seek to have their service management capabilities audited and certified as part of their goal to deliver the best service and to demonstrate its willingness to adapt to new stakeholder expectations.
Explains Edward Carbutt, Executive Director at Marval SA: “It is vital that newly merged companies understand how to develop and improve capabilities and resources to transition new and changed services into operations.
“The process starts with a service strategy introducing the company to service management policies, guidelines and processes across the ITIL service lifecycle. Service design follows with the development of services and service management processes. This includes design principles and methods for converting strategic objectives into portfolios of services and service assets.”
“The client is then introduced to the service transition. Ongoing effectiveness and efficiency in the delivery and support of services must however be pursued to ensure value for the customer and the service provider.”
Concludes Roodt: “Clearly introducing ITIL best practices can offer advantage. However, it’s important to reiterate that continuous improvement depends on access to timeously and accurate information.”