IT Due Diligence: Advice for the CIO

IT Due Diligence: Advice for the CIO

IT Due Diligence: Advice for the CIO
IT Due Diligence: Advice for the CIO

After a record-setting year in 2013, the pace of US law firm mergers and acquisitions carries on unabated, with 22 deals announced as of April 2014, according to Altman Weil. The 2014 Citi Bank/Hildebrandt Client Advisory expects “to see continued activity in 2014, as firms seek to grow domestically in the US and internationally.”

So with potential merger activity in your future, how does IT best prepare? Here are some ways to make sure you’re an asset to the process, not a liability.

The purpose of IT due diligence

The objective of IT due diligence is to identify synergies in the merger, understand potential risks, and estimate potential costs and timelines. Due diligence helps to identify IT assets and processes, determine whether they possess the flexibility to meet future business objectives of the combined firm, and to identify any necessary realignment of IT’s strategic direction with that of the new business.

In some peoples’ mind there are two types of law firm mergers – the merger of (more or less) “equals” and acquisitions. IT departments in firms that acquire a lot of smaller firms sometimes get into a cookie cutter mentality. It becomes a race to see how quickly IT can install the firm’s current platform in the merged firm. They bulldoze whatever technology the smaller firm has without any serious thought or evaluation. It’s a shame, because it does nothing to ingratiate the new attorneys and staff, and bigger doesn’t always mean better.

Get involved early

First and foremost, you want to get involved as early as possible in the due diligence process. The more lead time you have to do your investigation and examination work the better. Some of the more serious issues you uncover may need to be raised up the management chain and may end up as items of negotiation. The sooner they have the information the better.

The first part of the process is to make a giant inventory. For some firms that aren’t as organized as they should be, this may include updating a self-inventory. The inventory covers hardware configurations, software (versions, license counts, etc.), major vendors, and personnel. For some mergers this is as far as you can go without senior management’s approval, or the merger getting close to the final stages.

Meet with you counterparts

If time and management permits, you want to meet with your counterparts and obtain as much as you can regarding the culture, use and acceptance of technology, as well as unique applications and important processes. It can get quite heated as different groups advocate for their tried and true, familiar way of doing things.

A thorough investigation can take significant time, especially if you hone in on the processes, workflows and technologies used by each practice. Sometimes this is left for post-merger evaluation and cleanup. This is especially true if you are taking on a new practice area, or making a significant expansion of an existing practice area. Be wary of practices that suddenly gain a critical mass. For example, it’s one thing to have five or six IP lawyers out of hundreds adapt to the firm’s standards for new matter intake or conflicts, it’s another to have a larger group, used to unique tweaks for the IP practice, try to conform to those rules.

Start planning

calendarWith inventories in hand, you can begin to develop short medium and long term integration plans. Those plans are simpler if both parties are using the same versions of the same tools. In all the mergers I’ve been part of I was rarely blessed with anything that simple.

What does it take to get immediate connectivity and how quickly can it be done? How long before everyone is moved to the new email domain? How long before the lawyers can access the work product from both firms? Are there any showstoppers? What demands will other groups be making on IT? What schedules are other administrative groups looking to maintain? What timeframe is finance setting for operating off one set of books? How quickly will marketing want to communicate to all the new firms’ clients? And last but not least – which attorneys or practices do you have to leave alone because of client commitments that hit in the middle of your planned work? All that needs to be worked into a project plan, and since you can rarely do it all at once, it must be prioritized.

Start budgeting

calculator (1)With an integration plan in hand you can sketch out some anticipated costs. Management will want to know if the technology merger bill is $1 million, $10 million, or somewhere in-between. They will add your calculations to the numbers provided by other groups for discussion at the partnership vote. But your work doesn’t stop here. As time permits, you want to continue to refine your plans, your estimates and expectations.

After the deal closes

If/when the merger goes through, then it all comes down to executing the plan and attempting to get the technology, the user education, and the support they need through the stressful time. Added support staff and extra hands are always handy.

After the merger “go live” date you have to deal with the less pleasant things. In my personal opinion, the closer the merger is to equal firms, the messier it gets. You certainly have to deal with all those decisions you postponed from the initial cut over, or prioritized further down the list. But you also have to deal with the duplicitous nature of equal firms. If you have something, it probably exists in the other firm too.

With the added economies of scale, the personnel and structure will have to be evaluated. With the firms new size, do you keep your help desk in-house or outsource it? Do you really need two SAN Engineers? Which one will you keep? Of course, those decisions are only yours to make if you are the CIO chosen to remain in charge.

Good luck with your merger.