Merger Ahead

by David Schloss

For any business that gets involved in one, a merger means big changes: Corporate structures are changed, policies rewritten, jobs reorganized. Mergers can be particularly chaotic for businesses that rely heavily on voicemail, PCs, and other technology but lack the staffing or experience to ensure a smooth transition from separate resources at two companies to an integrated data system at one.

Like most other business processes, merging the technological assets of two companies is best handled after a careful period of evaluation. The old rules are out the window, and the new ones have to be written. This difficult but necessary chore will be one of the first hurdles the newly merged company has to clear. Companies need to keep the faith–and keep in mind the reasons they decided to merge in the first place. During the period of transition new systems can be put in place, old systems upgraded, and the needs of the end-user reevaluated to provide for a smoother workflow.

Merging companies usually shouldn’t make any immediate changes but should wait to see how things are working and where operations might be improved. Marc Wolfe, president of ProActive, a consulting company and VAR in Oakland, N.J., has worked with a number of merging companies. Wolfe takes a slow, systematic approach to combining technology assets, looking at both companies’ workflows–from the receptionist to the CEO–and suggesting steps to lessen the impact of changes while improving the allocation of resources. Wolfe often has to point out what should be obvious but sometimes isn’t.

“Take a look at the strengths of the companies and see which has superiority in each area,” he says. “There is some reason why one company is purchasing or merging with another, and in most cases that’s to expand into some area, to grow.”


Most businesses don’t necessarily think about technology when they decide to merge, but they soon discover the potential advantages to be gained by joining up. First of all, it helps solve some of the problems of purchasing the right equipment and hiring tech staff.

Grafton State Bank, a $125 million a year financial institution just north of Milwaukee, recently joined forces with Merchants & Manufacturers Bancorporation, a holding company for three other banks in the region. They did so for financial and competitive reasons, but are also finding ways to share information and integrate their IT departments.

Thanks to the use of a shared data outsourcer, all the banks and their branch locations experienced few technical glitches during the early stages of the transition, according to Don Bray, vice president of information services for Merchants & Manufacturers. Bray has been overseeing the merger and is pleased with the results. Now the companies are developing a wide-area network to encompass all the branch locations and are using that system to develop a corporate intranet. They hope that will let them take advantage of the merged company’s greater resources to improve services to their customers.

“We’re looking forward to the WAN-based intranet,” Bray says. “We hope to eliminate a lot of paperwork and a lot of courier runs.” Bray is also looking forward to improved customer relations. “A lot of the branches only had one person with Internet access. The banks themselves are starting to offer more online products that we want to demonstrate to our customers, and having the WAN allows us to do that. This will streamline our whole operation.”


Not every merger goes so smoothly. When companies join operations, every minor difference becomes an obstacle to be overcome. Without a doubt, the biggest one is incompatible platforms.

If one company uses Mac desktops and the other Windows machines, the decision may seem fairly straightforward: Pry the Apple aesthetes away from their tangerine machines and get everyone operating on the more conventional standard. But the situation is actually more complicated, especially when it comes to application, Web, and e-mail servers, according to Wolfe. In certain cases — when there’s a dedicated graphics department, for instance — it might be wise to keep some of those Macs around. Merging companies with different environments shouldn’t feel they have to select just one.

“One company might be running an NT server, and the other one might be on Novell, or Unix, or Appleshare,” Wolfe says. “Instead of junking one box, we look for ways to deploy different machines where they have strengths. We might have the Appleshare server handle the graphics department while the NT server handles the rest of the company’s data.”

Merchants and Manufacturers realized early on that each bank could function with some autonomy, so even though the separate locations share a common platform, they’ve chosen not to integrate them any further. Each bank still runs its own network, but all the core systems can communicate with the firm that processes all of their transactions. “We don’t have to be compatible on a desktop level to talk to each other,” Bray says. “We did a cost study and looked at the cost of connecting our locations to the data outsourcer individually versus the cost of combining them through one larger connection.” That’s part of the reason they decided to make the leap to a wide-area network.


Even if a company doesn’t take the opportunity to make sweeping changes to the system, a merger is a perfect time to brush out the IT cobwebs. First, figure out what the new IT staff will look like. Consultants can fill the gaps during the transition period, but the companies will soon want to hire a permanent staff member. On the other hand, if a small business already has an IT staff that sometimes sits around on its hands, they may suddenly find they’ve got a perfect fit.

At Merchants & Manufacturers, most of the banks are supported via Don Bray’s in-house staff, yet Grafton is an hour drive from the holding company’s IT department. Bray has found it helpful to maintain a staff at the remote location, rather than deal with sending someone during each trouble call. “Because of the distance, it’s difficult to send one of our guys out there — it basically takes a whole day for them to do that,” he says. “Grafton has two good IT people and I consider them to be informally part of the holding company team. For the other three banks, however, because they are so close, we don’t have to keep any IT people there.”

Bray hopes the WAN will also help. “We looked at the intangible savings of not having to drive to locations to do support,” he says. The company will be able to run some of their core software across the WAN, rather than requiring multiple copies at multiple locations, and manage certain things remotely. But the latter is something ProActive’s Wolfe warns against.

“I’ve seen a lot of companies try to do remote diagnostics after a merger,” Wolfe says. “Some don’t have the budgets to maintain staff full-time at a far-flung location, but I feel that if repairs are done onsite things work better. Local service is more immediate, and more reliable.”

Once the staffing problems are worked out, evaluate each company’s legacy equipment — those aging pieces of hardware that are frequently found at the lowest rungs of the IT ladder but sometimes carry vital corporate data. Many companies may have already done this when preparing for Y2K. “If they were paying attention during that time, they probably have already handled much of their aging technology,” Wolfe says. “But, if it’s a case where the systems are antiquated and inefficient, the company needs to evaluate the costs of keeping those systems. By changing from a legacy system, you can use the momentum of the merger to enact training programs at a time when people are expecting to see change.”

This is also the time to get rid of bad habits. If they haven’t already, the companies should establish an office ergonomics program, e-mail and Internet use policies, and rules that cover the use of software, including piracy, distribution, and licensing. Even when companies have already dealt with these problems on their own, the two merging entities will likely have slightly different policies and philosophies of managing all these issues. Now is the time to get on the same page.


Don’t expect the workers to adjust to all these new technologies and policies right away. Combine a few work forces, a few different computer systems, and a few different networks, and you get a group of employees with lowered productivity and a lot of questions. During the integration of the merged workflows, significant confusion can arise. Established practices are disrupted, and when old systems are replaced, it can be nearly impossible for employees to resume normal activities without some degree of training. As simple as a few hands-on demos, or as complicated as scheduled classes in hardware and software, training can ensure everyone is up to speed after a complicated change in business practices.

Many firms specialize in running in-house as well as offsite training classes on common applications and hardware. Even though all merging companies face the hurdle of bringing employees with different skill sets quickly up to speed, few take the time to offer computer system training, according to Margurite Corazza, Manager of Internal Development for CALC/Canterbury Corporation, which specializes in onsite and offsite training programs. It’s necessary to take a look at where the company now stands, what it needs, and what the skills of the employees are.

“We have discussions about where they want to go, what their goals are, who their target audience is, and what they need to learn,” Corazza says. CALC/Canterbury distributes customized surveys to students with questions about the existing skill sets, experience with the materials or related materials, and employee goals.

Training is especially important to consider when one company uses a piece of software or a computer system that is proprietary or has been customized. In that case, an instructor with experience in similar systems can be brought in to learn the product and teach it to those that are new to it. While it’s certainly feasible for the more experienced workers to train the newbies themselves, that arrangement can cause resentment. Workers should know that they aren’t valued less just because they don’t know the software.

“It has to be handled in such a way that people don’t feel threatened by the new systems,” Wolfe says. “It’s important to let the employees know that new systems are being brought online in order to ease their workload and improve their jobs.”

Employees may also feel they’re being forced to attend training classes, especially if they have skill levels they consider to be sufficient for performing their jobs. “Sometimes a company says, ‘Everyone is going to attend XYZ class,’ and that can cause resentment,” adds Corazza. The way to overcome this is to keep employees informed and give them a hand in the decision making process. “When employees aren’t kept in the loop,” she says, “that can become a real problem.”

In order to ensure that training doesn’t interfere more than necessary with a business’s operation, courses are spread over time. “Most companies prefer to split the class into half days with one group in the morning and a different group in the afternoon,” Corazza says. “Then we have a follow-up the next day or the next week.” Still, some companies prefer onsite training either in their own centers or at the employees’ work areas, and that’s a need a good training facility should be able to accommodate.


From the moment companies decide to merge, they need to be looking ahead. In fact, it doesn’t hurt to start planning even before a merger is in the works.

Remember that technology is essentially a disposable commodity. Many companies make the mistake of forgetting to budget for necessary changes in technology, leaving them without the capital needed to improve the infrastructure and the backbone of the organization. Some have turned to leasing to build-in turnover and ensure a modern desktop environment for the users, but it’s equally important to remember to improve the servers, network, archival systems, and Internet connectivity.

Most businesses won’t experience a merger as smooth as the one at Grafton State Bank, but they can do their best to make the transition from two companies to one an event that improves operations, increases productivity, and bolsters the bottom line. That, after all, is what a merger is all about.


MANY SMALL BUSINESSES spend little time concentrating on security, be it intrusion or virus protection. Because of all the confusion, a merger is a perfect time for hardware to walk out the back door, so managers must be vigilant. An inventory of both companies’ equipment, both before and after a merger, is a priority for insurance and tax purposes, but it is also needed to track any corporate theft or loss.

As corporate data sources mix, the possibility of lost data becomes increasingly prevalent, as does the possibility of corrupt information. Databases, word processing files, spreadsheets, images, and any other forms of irreplaceable data should be backed up to secure offsite locations frequently before, during, and after the merger. Too many companies keep their archives at the same location as the primary data, making them prone to destruction by fire or flood, misplacement, or the small possibility of damage by someone with a grudge. The purchase of a fast, reliable data backup system should be an early priority during a merger, as should be the establishment of a regular backup system.

Another possible form of data loss comes from viruses, which are another headache when employees from two separate locations begin to share data. The risk of infection multiplies with the combination, so effective virus protection software should be installed and run far in advance of any merger. Good virus protection is so readily available in the form of software from Norton and other companies that no firm has any excuse for going without it.

Small Business Computing Staff
Small Business Computing Staff
Small Business Computing addresses the technology needs of small businesses, which are defined as businesses with fewer than 500 employees and/or less than $7 million in annual sales.

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