Driving IT Separation at Pace
IT separation following a company divestiture can be a high-stakes, time-pressured exercise. The imperative is to disentangle technology environments quickly, securely, and cost-effectively, while minimising business disruption. To succeed, you need a clear separation approach and a disciplined execution and governance framework.
Below we outline the second of our series of blogs associated with the M&A journey from due diligence, separation through to value creation.
Part B: Separation & Merger: Driving Separation at Pace
Separation Hypothesis
The primary components associated wih creating the separation hypothesis which becomes the foundation for planning and transfer service agreement exist include:
Review the IT Due Diligence Materials
Before you start, you must thoroughly understand the landscape you are inheriting. Dive deep into the IT due diligence (DD) materials. Identify all applications, infrastructure components, data sets, and vendor contracts. Pinpoint critical dependencies and potential roadblocks early. Call out risks or any shortfalls you observe early. The DD review is the basis for all subsequent planning.
Review and understand your obligations within the TSA
The Transition Services Agreement (TSA) is your critical constraint. You must have a thorough understanding of both the Buyer’s and Seller’s obligations under this agreement. Create your own summary of the TSA obligations and share with leadership to ensure a common understanding is reached quickly.
Understand what services the Seller is required to provide, the service levels, and crucially, the defined exit milestones and deadlines. Failure here leads to service disruption or expensive TSA extensions.
Define your Separation Approach
With the due diligence complete, define your IT Separation Approach. This is where you decide the "how." Are you aiming for a complete greenfield build, a tactical carve-out, a lift-and-shift?
Your approach should be dictated by business needs, budget, and above all, the available time as dictated in the TSA. A clear approach provides the IT separation team and senior stakeholders direction.
Planning & Execution
Build a solid Separation plan considering TSA constraints and deadlines
Your separation plan must be built around the TSA, not alongside it. Develop a detailed, time-phased project plan with clear dependencies and a critical path. Factor in lead times for procurement, recruitment / mobilisation of resources, any data migration and leadership decision making! Many of these have a habit of taking longer than you think – err on the side of caution! Your plan must be realistic, resilient, and directly tied to achieving TSA exit on time.
Mobilise the right skills at the right time to deliver the plan
The best plan in the world will fail without the right people and skills. Mobilise specific skills when they are needed. You will likely need a mix of internal experts, who know the business, and external specialists, who have deep experience in rapid separation. Don’t be over cautious or reluctant about bringing in external SME’s if you see evidence that in-house teams don’t have the skills or exposure needed to be successful – especially when moving at pace.
A skills matrix and then a RACI aligned to your separation approach and plan is a solid starting point.
TSA Governance
Governance is not optional. This is the primary mechanism for managing complexity and risk.
Establish robust separation governance structures, including regular joint steering committee (TSA SteerCo) with the Seller to manage the TSA relationship, obligations and resolve escalations. Hold your own internal (Buyer) IT Separation SteerCo meetings so you can have open and frank internal discussions away from the Seller.
Ensure that the TSA Manager from both the Seller and Buyer are present or represented and manage any recurring TSA costs diligently.
Establish Separation Technical Design Authority forums with a clear RACI and clarity on who the decision makers are.
Whilst tension can be inevitable during pressurised separation initiatives, don’t underestimate the benefits of a good working relationship between the Selling organisation, their TSA manager, and the buying organisation. When moving at pace, this solid working relationship can reduce or even remove barriers and resistance that arise quickly, whereas if there is a fractious relationship, the opposite can be true.
Lift and Shift, rather than Lift and Change to minimise effort, cost and preserve timescales
Wherever possible, replicate the existing environment in a new and secure location with minimal changes to configuration (Lift & Shift). Avoid the temptation to upgrade or modernise during the separation phase unless necessary as this introduces risk.
Is this the golden rule for delivering IT Separation at pace? It is certainly right up there. Your primary goal is separation, not optimisation.
While focused on the immediate task of separation teams should capture technical debt and areas of potential improvement in a ‘parking lot’ that can be prioritised by both IT and the business and delivered once separation is achieved and the TSA obligations are fulfilled. It is fine to look to the future and consider how benefit and value can be added – but resist the temptation and pressure from stakeholders to include this in separation scope.
Opportunities for Value Creation
Develop a future value roadmap
Building on the last point, this parking lot can be developed into an improvement and optimisation roadmap for delivery post separation.
Develop a roadmap that adds to or builds your target state architecture and the steps to get there after separation.
This roadmap should detail how IT will support the newly independent business's strategic goals, ensuring you not only survive separation but are positioned to thrive in the long term … but (ideally) only once separated.
Capability roadmap and Innovation
Many separations are mergers focus on driving TSA exit at pace hence while many opportunities for optimisation can be identified, it will be key to establish an appropriate IT Operating Model – that enables the required level of innovation and value creation to be realised
The operating model definition is a balance between having the ability to rapidly add value vs shaping the optimial run costs associated with operating the business.
This is further complicate with the acceleration of AI capabilities that are either inherent within modern cloud applications or are available as add on / wrapper solutions to drive automation, better insight and drive bottom line EBITDA performance improvement.
We will explore the balance between capability upgrade, value creation and ensuring benefits are realised from investment in business optimisation, as well as key considerations of how AI can support Operating Model optimisatio in Part C of of M&A blog series. Follow our blog to stay updated.
Contact Searchlight Consulting today to learn more about how we can help with your digital transformation.
Follow us on LinkedIn for additional insights.