Accelerating transaction success by applying zero trust principles to mergers, acquisitions, and divestitures
Mar 22, 2022
Mergers, acquisitions, and divestitures create value by seizing chances to drive growth, enhance margins, build business agility, and increase performance. They can lead to better customer experiences by refocusing organizations on market needs and drive transformation by outcompeting business rivals.
Realizing this, businesses were bullish on M&A in 2021 according to the consulting firm PWC, with more than twice the overall deals and megadeals (those valued at $5 billion or more) in the U.S. compared to the previous year. Bain & Company reported that the M&A market reached an all-time high of $5.9 trillion in 2021.
But there are significant barriers to ensuring they demonstrate value on a reasonable timeline. Today's complex IT environments – muddled by remote workforces, hybrid architectures, and a treacherous cyber threat landscape – can erode projected deal valuation and obscure synergy benefits. According to Bain & Company, 73% of deals experienced technology integration issues.
Zscaler Field CISO Pam Kubiatowski writes that, for IT teams, an M&A deal often means long hours, costly process creation, and overlay environments to provide both organizations with cross-company connectivity. Resource availability, she says, becomes a significant problem given the different IT estates, hybrid architectures, and applications companies use to house and distribute them to their workforces.
Benefits realizations for a transaction require integration planning, progressive workflows, and modern tools to ensure synergies are realized as quickly as possible. The goals are to quickly, yet securely, enable businesses to engage together, identify and remediate risks from cyber threats and compliance missteps, simplify IT operations, and realize value capture.
Mergers, acquisitions, and divestitures are most successful when they consider:
- Accelerating time-to-value – CEOs and advisors are under pressure to demonstrate value. Clunky or non-existent integrations only stand in the way of proving out a good business move.
- Cyber risk and compliance – "Buying a breach" didn't become a common phrase by accident. Asset inventory is essential to IT security because you can't protect what you don't know exists. Locking down your recent acquisition or divestiture using zero trust principles is a top priority for day one.
- Value capture – Post-transaction, technological debt creates dis-synergies, driven by replicated technology, unnecessary complexity, and operational overhead, which impedes cloud-first strategies. According to Deloitte, merged organizations can achieve 15-20% cost synergies by discovering and exploiting overlaps in IT functions (towers, technologies, operations, etc.).
- Priorities/talent – By simplifying operating models through SaaS-native spending, organizations reduce the need for bloated IT teams and keep spending focused on business imperatives.
- Experience & discipline – Developing a highly repeatable approach reduces costs and accelerates time-to-value for future mergers and acquisitions.
Entities gain a competitive advantage during the first hundred days by securely connecting personnel from both the acquirer and acquired organizations, allowing workstreams to quickly commence other integration activities.
While that may seem like a yellow brick road to post-M&A bliss, it’s difficult to achieve in practice. Hybrid workforces, technical debt, cloud/SaaS migrations and limited talent often elongate integrations post sign and close.
These issues are all conveniently addressed by zero-trust security principles, though. CXOs owe it to their organizations to explore digital transformation as a means to speed up strategic M&A and divestiture moves and to ensure their companies grab their slice of what are today record-sized pies.
How zero trust speeds up time to value in M&A
Prior to zero trust, the traditional approach required significant upfront planning, investment, and effort to achieve marginal results with respect to risk management and efficient user access. Today, enabled by zero trust principles, the modern approach involves a quantum leap forward in time and effort efficiency while elevating risk posture and easing the user experience during integration.
By finding the right zero trust security provider, organizations can securely connect disparate users, sites, and applications without the significant infrastructure, telecommunications, and infrastructure integration delays that have come to typify complex mergers.
Key ways a zero trust security vendor can help accelerate your M&A or divestiture process include:
- Eliminating lengthy transition service agreements (TSAs): TSAs ensure business continuity for the buyer. However, they also delay synergies, create higher operational costs, limit buyer flexibility, and increase dependency on the seller.
- Adopting X-as-a-service: X-as-a-service solutions make a significant difference to TSA length, shortening the period from years to quarters. Instead of carving out or integrating existing systems, an entirely new, cloud-based system is deployed. This brings the benefit of accelerating both automation and process standardization to the business.
- Embracing bridge services to fill the gap: Companies no longer need to rely on their own in-house IT capabilities to close a deal; a digitally savvy third-party can help the acquisition for as long as necessary.
- Achieving synergy savings: Minimize non-recurring stand-up costs (infrastructure, telecom), eliminate interim facilities when migrating assets to the cloud, identify and address cyber threats early on, eliminate IMO workstream dependencies on initial connectivity, which impedes progress and elevates non-productive resource allocation.
- Reaching operational efficiency: Adopting a zero trust platform drives vendor consolidation; technology/application rationalization leads to recurring cost reduction; talent/skills realignment helps match cloud/XaaS transition; and focused M&A/Div transaction drives execution velocity.
Mergers, acquisitions, and divestitures are key growth and transformation strategies for businesses. To capitalize on the opportunity, organizations should modernize their approach to include a cloud security platform utilizing zero trust principles. This helps reduce complexity when it comes to security, GRC, efficiency, and expenditure. CXOs should consider how adopting a zero trust architecture can help their organizations realize the full promise of M&A.
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