You are on page 1of 4

Cognizant Case Study

Mergers and Acquisition

Introduction 36 per cent of 2008 volume, which stood $53.4


billion, up from just 10 per cent in 2007 whereas
Few organizations have expertise integrating
deals in the range of $1 billion to $5 billion range
business after mergers and acquisitions activity,
made up 25 per cent of the total with an
yet business success is dependent upon
announced value of $36.7 billion.
successful integration of its People, Process,
Technology and a well planned M&A strategy.
Without a well thought and effectively managed Key Challenges in Mergers &
plan, the merger or acquisition risks an Acquisitions
incomplete integration, business frustration, loss The post-merger integration phase covers the
of critical staff, higher costs and an unnecessary operational part of any merger project. Often this
complex environment. Successful integration phase determines if the merger becomes a
starts before the merger or acquisition. Due success or failure. The four key aspects of any
diligence must be used to develop an integration business organization are typically Strategy,
strategy, plan and team that will give confidence People, Process and Technology. Many of the
to all stakeholders. Identifying key decisions critical success factors of the post-merger
around which applications, infrastructure and IT integration are “soft” factors, which involve
processes can go forward and key actions to people and their interactions with technology and
create the new organization after the merger or process. Value is created by focus and adherence
acquisition is also a necessity. to strategy.

Global merger and acquisitions in the insurance Therefore, Cognizant feels it is necessary to focus
sector have reached all time record of 148.7 attention on issues such as
billion dollars in 2008, up 34 per cent from the
previous year. Strategic activity accounted for 97 ■ Development of a new management structure
per cent of total activity in the industry, as for the new, larger organization; especially over-
compared to 83 per cent in 2007. Insurance coming leadership problems in very large units
companies in the United States made the
■ Bringing together formerly separate units from
maximum number of acquisitions. US-based
both former organizations
insurers made acquisitions worth $71.6 billion, up
by 102 per cent from the deals in 2007. Deals ■ Allocation of clear roles and responsibilities in
worth over $10 billion each accounted for nearly the emergent merged entity

case study
■ Communication of the new strategic objectives Pre-merger Planning
and the new vision of the merged organization ■ Undertake Due diligence and Assessment of
■ Implementation of a new shared corporate integration effort
culture and management culture ■ Finalize the Insurance portfolio for re-alignment
■ Integration of the multiple IT organizations based on the list from ‘Target Assessment’
■ Reduction in redundancy and duplication of IT phase
systems ■ Identify possible change in company rating and
■ Harmonization of management compensation anticipate the rating agency reaction
and management incentive systems ■ Structure the deal to best monetize the assets
■ Overcoming of language barriers and country ■ Plan for Day One and conduct internal dry runs
specific cultural differences Planning for M&A
■ Overcoming of staff’s suspiciousness of the ■ Pair IT and business across merged entity to
other organization form cross functional teams to develop
■ Knowledge transfer among units that are to be detailed area wise integration plan & prepare
integrated for joint IT governance
■ Maintenance of customer and intermediary ■ Conduct joint dry runs and perfect execution
relationships during integration plans
■ Employees who fear being earmarked redun- ■ Enable communication to all stakeholders
dant ■ Provide BAU services (Helpdesks, Production
■ Impact on the existing corporate culture support, System availability, Scalability, etc)
■ Implement execution plans and programs cov-
Cognizant’s IT Integration Approach
ering functional areas, applications, data and
during M&A
infrastructure elements
Cognizant’s roadmap to support clients during ■ Enable fulfillment of regulatory and legal
Merger and Acquisition transaction has
requirements
structured mile stones and processes to
continuously raise the bar in order to execute ■ Complete Phase 1 of consolidation of book of
effectively. business, migration of data and customers,
product rationalization, infrastructure consoli-
Target Assessment dation
■ Identify and assess sources of synergy (cost ■ Enable cross-selling and up-selling
and revenue), costs for synergy extraction and ■ Refine and detail IT governance plans
accrual of long term benefits ■ Fine tune the execution plans
■ Analyze the existing system architecture
to decide if it is ready to accommodate the Execution
systems of the target organization. In an insur- Effective senior management team for execution
ance industry merger, this would also include
analysis of the fitment of various products in
■ Common Vision and Strategy Workshops
the portfolio of the merging companies ■ Experiential Learning Workshops
■ Assess existing staff skills and carry out ■ Creating effective governance groups
adequate resource planning, a product re-
New culture supporting new enterprise strategy
alignment exercise might also be carried out
■ Planning Participation
■ At the end of this phase, the IT organization
articulates the principles that would guide ■ Team Launch Workshops
the integration decisions, system integration ■ Coaching
strategy and approximate timelines for ■ Interactive simulations
achieving each milestone of integration

2 case study
Meet integration and business operation goals Unlocking Value
■ Implement the new organization design & IT ■ Integrate to unlock the true potential of the
governance plans assets through the synergistic combinations
■ Execute HR policies, procedures and processes identified from the ‘target assessment’ phase
that support the Guiding Principles ■ Unlock value based on optimal levels of appli-
■ Implement business processes that match cus- cation and infrastructure rationalization (in-
tomer, cost, quality and employee satisfaction line with business model)
goals ■ Achieve strategic business agility based on
■ Complete phase 2 of consolidation of book of plug and play IT and Business com7ponents
business, product rationalization, application ■ Stress test the strong foundation developed
integration and rationalization, Infrastructure for future M&A and strengthen as necessary
consolidation
Deliver on Targets
■ Implement the post ‘Execution phase’ plans
■ Complete Phase 3 of Application integration
and rationalization, and Infrastructure consoli-
dation
■ Enable automatic consolidation of Book of
Business based on Straight-Through-
Processing
■ Comprehensively implement IT Governance
plans

3 case study
Partnering Clients for IT Integration during M&A

Client Description Brief Description Business Benefits

General System consolidation System modernization strategy at ■ Reduced system complexity by rationalization
& modernization the enterprise level for multiple of number of policy administration platforms
Insurer companies with different business from 15 to 5 and claims platforms from 7 to 3
strategy
in US models and spanning across all ■ Reduced maintenance cost by around 15-25%
core insurance process

Infrastructure Integration of infrastructure ■ Reduced cost by more than 1 million USD spent
Large Life Integration and of acquired company and per month towards transmission services
Insurer in US systemizing corporate decommissioning the system ■ Increased productivity due to standardized
and institutional of acquired company tools and products enterprise-wide.
functions

Post-merger Optimization of the business ■ Anticipated cost savings due to suggested con-
General business operations insurance portfolio by reducing solidation of 12 products from 4 lines of busi-
Insurer consolidation the number of products and ness unto another existing business platform
platforms used across the business ■ Expected increase in cross-selling and
in US units and consolidate streamlined marketing due to consolidated
set of products and supporting platforms

Rationalization of myriad of policy ■ Savings of 40% of annual IT expenditure


General Business administration systems on multiple
Transformation ■ 30% decrease in average speed to
Insurer platforms, creation and implementa- answer within the first year
tion of technology platform encom-
in US passing policy administration, billing
and agency management

Application portfolio Development of an integrated ■ Reduced the maintenance costs by $9


Large Life rationalization solution involving a combination million/year
Insurer in US of sun-setting, consolidation and ■ Additional $4 million were saved in project
migration phases across the implementation costs attributed to Cognizant’s
portfolio of applications Onsite-Offshore delivery model.

About Cognizant
Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting and business
process outsourcing services. Cognizant’s single-minded passion is to dedicate our global technology and
innovation know-how, our industry expertise and worldwide resources to working together with clients to
make their businesses stronger. With over 50 global delivery centers and 64,100 employees as of June
30, 2009, we combine a unique onsite/offshore delivery model infused by a distinct culture of customer
satisfaction. A member of the NASDAQ-100 Index and S&P 500 Index, Cognizant is a Forbes Global 2000
company and a member of the Fortune 1000 and is ranked among the top information technology companies
in BusinessWeek’s Hot Growth and Top 50 Performers listings.

Start Today
For more information on how to drive your business results with Cognizant, contact us at
inquiry@cognizant.com or visit our website at www.cognizant.com.

World Headquarters Australian Headquarters India Operations Headquarters


500 Frank W. Burr Blvd. Suite G17A, The Jewel Business Center #5/535, Old Mahabalipuram Road
Teaneck, NJ 07666 USA 566 St. Kilda Road, Melbourne Okkiyam Pettai, Thoraipakkam
Phone: +1 201 801 0233 Victoria, Australia 3004. Chennai, 600 096 India
Fax: +1 201 801 0243 Ph: +61 3 9526 8470 Phone: +91 (0) 44 4209 6000
Toll Free: +1 888 937 3277 Fax: +61 3 9526 8410 Fax: +91 (0) 44 4209 6060
Email: inquiry@cognizant.com inquiryaustralia@cognizant.com Email: inquiryindia@cognizant.com

© Copyright 2009, Cognizant. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or
otherwise, without the express written permission from Cognizant. The information contained herein is subject to change without notice. All other trademarks mentioned herein are the property of their respective owners.