Challenge of Change: Mergers and Acquisitions
By Al Brisard
It’s no secret that the management of a telecommunications business is a complex undertaking. Changes in market conditions, competition and market share only feed that complexity, and invariably require a response. Any business must understand that the need for change is a constant, but that change shouldn’t divert critical internal resources from what they are doing successfully in order to address change. Instead a business needs to plan for change, develop a process (or processes) for implementing it and execute on the plan.
Mergers and acquisitions, new operational processes/systems and emerging market pressures are examples of change that require swift action and astute decision making. Strategic decisions usually made at the top of the organizational pyramid inevitably create a ripple effect, requiring changes throughout an organization. This blog, Mergers and Acquisitions, is the first in a multi-part series which will discuss the “Challenge of Change," and address steps to be taken to avoid problems before they arise and eliminate pain points that might develop as a result of change.
Mergers and Acquisitions
The U.S. economic recovery continues to accelerate, and carriers are in the forefront of organizations who are contributing to it. Customer demand for new technologies, the expansion of services and acquisition of new cloud applications are some of the pressures driving carriers to accelerate change. The goal is to bring new products and services to market in a more timely fashion, and position themselves to survive and thrive in this expanding economy.
Instead of going to the expense and time of building new functionality and features or incurring the cost of organically growing the customer base, carriers often decide to merge with or acquire (M&A) another organization that has a coveted service offering, a better network or an incremental customer base.
Regardless of the size of the two organizations, they will too often get enamored with the financial details and not the details associated with operations; however, the benefits of M&A must be confirmed up front by the carrier to ensure it is paying what is reasonable for the other carrier. It is necessary to carefully analyze all available data, not just the financials, and determine which aspects of network, support, systems and equipment can be optimized.
- How different are the networks?
- Is it necessary to retain all physical facilities or can some facilities be sold?
- Is it necessary to change the actual infrastructure the service is riding on?
- What process changes are required such as ordering, provisioning, billing, inventory control and IT support?
- What system and tool changes are needed?
- What assets will need to be consolidated and at what cost?
These are some of the key questions that need to be answered before executing any consolidation.
Some typical areas for consideration include:
- Product/service impact – compare service feature sets and pricing to understand what issues may exist based on the two services already deployed
- Evaluation of both technology platforms – determine which one stays and which one needs to be acquired or transitioned
- Capacity – verify that capacity exists or can be created on the chosen platform to support the newly acquired customers
- Review back office systems and activities – identify areas such as provisioning, customer billing, service and delivery processes and systems that need to be modified to support the migration
- Organization – determine how best to organize and what human resources actions should be taken
- Analyze the effects the unplanned event is going to have at the customer level – what needs to be done to retain existing customers or integrate a new customer database with the existing database while avoiding customer churn
- Execution effort – assess the level of effort (internal or external), to execute a migration
Similarly, after a migration or acquisition, further analysis is needed to determine if targeted processes, systems and assets have indeed been optimized. Were assumptions about the comparative value of two or more redundant services accurate? Did the return justify the change?
A services migration or network consolidation also requires a myriad of business decisions. Inevitably many cost components need to be assessed. The level of complexity and effort correlates to size, depth and uniqueness of the merged or acquired company.
Finally, a carrier planning a merger or acquisition of another carrier needs to realize that its existing “business as usual" (BAU) internal resources and those of the other carrier may not be sufficient to absorb the extra work required to meet migration or consolidation objectives. Often, multiple areas within a migration need extra resources and focused activities to drive migration-specific tasks that are outside the capabilities or bandwidth of the internal BAU teams. In these circumstances, finding a reputable, experienced third party transition/consolidation organization will keep the migration or consolidation on track, and ultimately be the most cost-effective way for a carrier to successfully merge or acquire another carrier.
Al Brisard is vice president of marketing and business development at Vertek Corp. , a leading provider of end-to-end business process outsourcing, business consulting and managed business assurance offerings that allow communication providers to reduce costs, improve customer experiences, grow revenue and ultimately improve profitability. Contact him at firstname.lastname@example.org.