Pity the poor CEO who believes he has just led his company to glory through a juicy acquisition. The ink was barely dry on the AT&T/TCI and Daimler/Chrysler press releases when BP trumped them with its bid for Amoco. These days, the title of Biggest Merger Ever is about as long-lived as a mayfly. Although these and many other companies clearly believe that size matters, experts who have looked closely at what makes for a successful merger or acquisition say its the way companies follow through that counts. Mercer Management Consulting, New York, claims that nearly half of all mergers done since 1990 have "destroyed" shareholder value. Why? Deals that look good on paper fall woefully short if senior management doesnt understand the complexities of integrating the new acquisition. While a successful integration is extremely complicated and requires a simultaneous focus on many different facets of the organization, its clear that one of the most important -- and often poorly appreciated -- efforts is a timely and sensible melding of the companies information-technology (IT) functions. "In almost every merger or acquisition weve studied," says Ronald N. Ashkenas, managing partner at Robert H. Schaffer & Associates, a consulting firm in Stamford, Conn., "IT has emerged as one of the most critical aspects of integration. Whether providing an accurate assessment of payroll, revenue, and other financials up front or addressing key fundamental questions about how the new entity will do business going forward, well-integrated IT is critical." Despite the importance of IT, however, Ashkenas says that "about 90% of all acquisitions are done purely on a financial basis. Integration issues of any kind receive very little thought." He adds that while companies have walked away from some deals when the total cost of an integration looked unfeasible, IT alone "is not a deal-breaker." Even IT executives who sit on the senior management teams contemplating mergers or acquisitions are present to lend a big-picture view rather than to weigh in with a detailed assessment of the IT issues. At Compaq Computer Corp., for example, which has acquired both Tandem Computer and Digital Equipment Corp. in the last year, senior vice president and CIO John White says, "While I was involved in looking at these deals as a business leader, IT as an organization really didnt get involved until after the announcements." Where does that leave CIOs and other top-rank IT executives? For the most part, they roll up their sleeves to tackle the complexities of IT integration after the deal is done. And while there are many ways to proceed, there are common threads that run through most integration efforts. Most decisions are shaped by the underlying philosophy of the acquiring organization (for example, is it a firm believer in centralization and common systems) and by just what sort of deal is in question. "If a takeover is a consolidation," says Joseph Nemec, a senior vice president at Booz Allen & Hamilton in New York, "then a scalable back-office infrastructure and tight integration are crucial. This is the situation at some leading banks, which can acquire new banks and fold them into their operations very quickly. But if youre acquiring a company to move into a new line of business, things get more flexible. You might only consolidate financials and take the other facets on a case-by-case basis." Some observers frame the issue another way. "If a merger or acquisition is strategic," says Ray Rebello, director of market development for software vendor J.D. Edwards & Co., "you probably are interested in tying the new company very tightly to yours through integrated IT. But if the move is tactical -- if youre really just after a product line or a sales force, or if you may sell the company again in a year -- then you may want to explicitly avoid those tight ties." While there may be reasons to integrate only a fraction of IT operations, most executives come down firmly on the side of fast and thorough IT integration, beginning literally within minutes of the announcement of the deal. "When we acquired Digital," says White, "we had the two companies networks connected within hours so that we could send e-mail to everyone. There is a huge value in having your IT department provide a common infrastructure ASAP so everyone feels as though they work for the same company." White says that Compaq also worked hard to give Digital employees immediate access to Compaqs intranets. "We saw the traffic to the area of our site that explains benefits soar after the deal," White says. "People wanted to see just what our insurance coverages were, our vacation policy, etc." Others agree that providing a rapid technological bridge to the newly acquired company has enormous value. "Before we even look at a single application," says Rick Davidson, vice president, information services strategic planning at Case Corp., Racine, Wis., "we link e-mail systems and other network functions. Getting everyone connected provides an excellent baseline going forward." Once that connectivity is established, there are many ways to proceed, but most companies prioritize according to what Davidson describes as "scope, sequence, and pace." Scope is the most complex. It is nothing less than the sum total of all the IT integration that will occur. Efforts to get a handle on it often begin even before a merger or acquisition is announced, as IT organizations embark on a round of due diligence. One purpose of surveying the other companys IT organization is to send up a red flag if anything looks costly or troublesome. But, since such problems never kill a deal, the real benefit may be to give the IT organization of the acquiring company a chance to begin crafting a plan for integration. At Rawlings Sporting Goods Co. Inc., St. Louis, for example, last years acquisition of Victoriaville, a Quebec-based maker of hockey equipment, was announced in September, but "we had been planning our IT strategy from early August," says James Cook, Rawlings CIO. That doesnt mean, however, that it was as easy as throwing a switch. "In the early days you cant do a lot. In fact, in some ways we were flying blind. We knew what applications they had, so wed read the marketing literature on them, but we couldnt get our hands on anything until after the deal was signed." Nonetheless, Cook says it proved helpful to have a general plan as early as possible, especially since the deal -- though small (Victoriaville has sales of about $14 million a year) -- posed certain complexities. "We essentially acquired two companies at once," Cook says, "since we only wanted the products in the U.S. market and the company itself for the Canadian market." That meant that the systems running U.S. operations were shipped to St. Louis, while a separate system that pertains only to the Canadian market has been kept in Quebec, largely for language issues -- most of it is in French. Globalization is the reality behind most IT-integration efforts today and greatly affects the scope. Advances in networks, the rise in importance of the Internet, and the ability of key software packages to operate in multilingual environments now make it possible to achieve tight integration around the world. In the past far-flung operations were usually allowed -- or forced -- to run on their own IT systems, creating a nightmare for companies attempting to achieve any sort of commonality. Rawlings already had decided to roll out ERP software from J.D. Edwards before it acquired Victoriaville and wont need to change its plans, because the software can be configured to accommodate French and English. Similarly, Compaq says it got lucky in the DEC acquisition because both companies were in the midst of deploying ERP software from SAP, albeit differently. "We both were planning a worldwide deployment," says White, "but at Compaq we were taking it one segment at a time, while at Digital they [were] converting everything that had to do with their European PC operations and then using that as a model." White says that those conversion efforts will now follow the Compaq road map, and "over about two years well achieve one common view for all of Compaq, DEC, and Tandem. We are driving hard toward that vision." "The quality of the applications drives most decisions," says Fred Magee, vice president and research director in the technology-management area at Gartner Group, a consulting organization in Stamford, Conn. "You have three basic choices: go with the systems to the acquiring company, mix and match, or use the occasion to reinvent your processes." White says that while Compaqs approach takes precedence, clearly Digital has many strong systems that will be kept and made company standard. At Case, "While our goal is to have everyone on the same systems eventually, its possible that some things at an acquired company may be running better than they are at your company, and you dont want to screw that up," Davidson says. Although the tumult of a merger or acquisition may seem like the worst time imaginable to reinvent processes, that is, in a sense, what Rawlings is doing. The company had decided to install ERP software from J.D. Edwards before its recent acquisition. Once the deal was made, Rawlings decided not only to extend J.D. Edwards to the acquired company but to install the software there first, as a test bed. "We felt that it would be more efficient to cut them over to a new system at once," Cook says, "rather than learn their current systems and then switch them." Whatever the ultimate efficiencies, he says that initially the project was "a logistical nightmare, since we were also beginning to roll it out for Rawlings and didnt want that effort to stall." So a separate team was created to bring Victoriaville on to J.D. Edwards as fast as possible. Some additional consulting help from J.D. Edwards also helped. "It was all worth it," Cook says. "We learned a lot that helped our own Rawlings implementation go faster, things like how to configure invoice flow, standard sales orders and pricing, and more." Reliance on a major piece of software such as an ERP system can not only determine the scope and direction for an integration but the sequence as well. After all, its almost a certainty that ERP issues will come first, because so many functions are bundled within such software. Determining the sequence of other aspects of integration is not nearly as cut-and-dried. Davidson says Case begins with "finance and any other systems that touch the customer, because we want to look like a single entity to all our customers." At Compaq, however, incoming CIO Michael Capellas (who joined the company in August and is currently working with White to ensure a smooth transition before White retires later this year) frames it a little differently. "I view integration in two tiers: On the back end you want a solid-as-a-rock engine giving you common e-mail, networks, back-office applications, etc. On the customer-facing side, you might want some separate systems because different products may go to different customers, and at a large site you may have many different buyers you want to serve well and flexibly." Doesnt that argue for common systems? "To the degree that they let you speak with one voice, yes," Capellas says, "but thats different from the face you present. You have to let concepts of good service inform your moves. There is no one-size-fits-all approach." Economics also plays a part. Davidson says that when it comes to the "meat and potatoes" of manufacturing and engineering systems, "if theyre running well and have life left in them, then you dont necessarily replace them right away." It can be the same, he says, for some applications such as HR and even finance. "If they dont differentiate the company, they get a lower priority." Sequence, therefore, is closely connected to the overall pace of the integration, and here again companies can differ. "If you move very fast," Davidson says, "the acquired companies can get so caught up in dealing with headquarters that they take their eye off the business. On the other hand, you need economies of scale and a single culture, so at some point complete integration is valuable." Many consultants advise against a "settle-down" period following a merger or acquisition, arguing that while it can be tempting to usher in a period of calm, in the long run "the faster the integration can take place and the more that specific leadership can be brought to bear, the more successful the deal will be," believes Erich Almasy, a vice president at Mercer Management Consulting in New York. Why? "If you wait, people become unclear as to why the deal took place at all, what the goals are, how the current staff fits together. And the new entity needs to focus on common customers, marketing messages, and cost structures." Moving fast, however, can place a strain on resources. Integrating IT well can save substantial money over the long haul, but may require an initial upfront investment to make it happen. Almasy says that an IT "SWAT team" can be useful. "If you have a group of people who can compare what each company has, what can be done away with in terms of legacy systems, when buying now can save money later, that can be a huge help." Extra money and dedicated resources may be out of reach for most companies, but the larger issue is whether companies should structure their IT organizations with an eye cocked toward potential mergers and acquisitions. "I think that will be a core competency separating winners and losers," says Compaqs Capellas. "Our stated direction as a company is to grow through acquisitions," says Rawlings Cook. "That was a big reason to move to a major ERP software package that could provide flexibility and growth. We learned a lot with Victoriaville, and our next acquisition will go more smoothly, Im sure." More acquisitions appear to be a certainty for many: In the first six months of this year M&A activity outstripped all of 1997, a record year. In fact, the first half of this year saw a merger of $1 billion or more announced, on average, every business day. That means that IT executives will not only be kept busy but may get more respect. "We are seeing a greater awareness that IT issues should be examined more closely up front," says Michael Keating, an analyst at Cambridge, Mass.-based Arthur D. Little Inc. "In fact, I think youll see the day when an acquisition is driven by the presence of a good IT organization that someone wants to get their hands on." "There is no doubt that a solid IT function is a hidden gem in some deals," says Robert Schaffers Ashkenas, "if the acquiring company can exploit it."