It seems every day there is a new announcement about one company buying another one. Sometimes the target company is a competitor, other times it will be a company that will enable the buyer to complement or expand their portfolio of services or products. (For example, Verizon bought CyberTrust to acquire our extensive portfolio of professional services.) An early stage of the M&A courtship is the Due Diligence phase, where the buyer sizes up the target, checks the books, reviews production, and details assets. If everything looks good and the price is right, they walk the aisle together.
What does BC have to do with M&A? I’m glad you asked. Here are what I believe are 5 important BC-related questions that should a part of every M&A effort and should be asked of the target company:
- Do they have an active contract with a BC/DR vendor, and is it assumable? If the target company has a valid contract with a vendor it may represent an ongoing legal agreement and financial obligation that may not end with the purchase, or maybe can’t be assumed by the buyer if it so desires. Depending on the integration plans the buyer intends to implement, the arrangement may still be necessary for a length of time (and may need to be extended) or it could be unnecessary or redundant. Often times this is overlooked during the Due Diligence Phase and could turn out to be an unpleasant surprise later, effecting the actual cost of integration. (Always remember, management doesn’t like M&A surprises!)
- Do they have trained BC/DR staff? It has been my experience that those companies that do poor due diligence often don’t recognize the value of staff they are acquiring. By not addressing personnel issues right up front they find the cream of the crop walking out the door, taking their valuable skills and tribal knowledge with them, and are left with the less nimble folks who have fewer options, and maybe less skill and knowledge. Finding a trained staff who can implement a successful BC/DR program can be a valuable asset when evaluating the talent about to join the mothership.
- Are there any assets that can be used to augment the buyer’s recovery capabilities? Many M&A methodologies overlook technology and physical assets that would be a wonderful addition to the resources available to improve recoverability for the buyer. Instead of sending everything to a landfill in New Jersey or selling it for pennies on the dollar, the M&A team should be encouraged to keep an eye out for what seems to be redundant resources that could be used to upgrade the buyer’s current state of recovery and integrate new capabilities that will be needed for the newly acquired operations. Equipment I always look for includes telephone switches, servers, disc farms, tape management systems, routers, generators, UPS, and HVAC equipment. I also want to take a look at their facilities in case I find a great place to create a new cold/warm site, or find useful alternate telecommunications and power pathways, or provide an offsite business area recovery capability. Like sorting through a flea market or attic, you may find the technology equivalent of a Mickey Mantle rookie year baseball card.
- Have they done a recent Business Impact Analysis? A good BIA will tell the buyer what the most critical business processes are at the target and will help set expectations for priorities for the integration phase and ongoing recovery requirements and capabilities. I have on a number of occasions also used the ISO standards to review security and recovery concerns at acquisition targets to get a better feel for what problems might come along before the buyer’s name goes on the wall.
- How will the acquisition change recovery requirements at the buyer? If the acquisition goes through, it will inevitably change the scope and perhaps the way in which the buyer plans for disaster recovery and business continuity. The new addition to the company fold will bring with it new equipment, connectivity needs, business areas, and perhaps facilities. For example, the target may bring with them 100 new servers. Some of those servers may support critical operations that require immediate failover where none currently exists in the buyer’s backup location. Getting out in front of these costs will go a long way to determine just how great a deal this was. Including these expenditures during the Due Diligence Phase can help to effect a number of decisions regarding price, data center expansion, and additional recovery costs.
With these questions in mind, I always encourage the BC/DR manager to sit down with the M&A team to present these questions for inclusion in their due diligence methodology. Getting them to keep an eye out for this information you need, along with your potential shopping list, will increase the BC Program’s visibility and will perform a valuable contribution to a successful merger. Involvement in the M&A process will prevent a merger diluting the current state recovery capability and can serve to enhance and expand it. At the very least, BC/DR will get to look over the loot before it disappears out the door. Please feel free to make comments and offer your own suggestions and war stories. And, as always, feel free to contact me directly. Happy merging and acquiring.
© Copyright and All Rights Reserved Howard M. Peace