Yammer acquisition viewed through the M&A Playbook for CIOs

This is a guest post by Tobias Klauder, principal lead of Venture Integration within Microsoft IT.
I’ll always remember the summer of 2012 because right after it started my vacation plans were severely altered. That’s life when you work in IT and with the acquisitions team of a multi-national company like Microsoft. But I wouldn’t have it any other way.
Announced on June 25, Microsoft’s acquisition of Yammer Inc. for $1.2 billion was the largest acquisition of the quarter and the second largest of the year [source]. At the time, the Yammer business had more than 6 million external corporate users, a large percentage at Fortune 500 companies.
During the announcement, Microsoft CEO Steve Ballmer emphasized that Microsoft was not only interested in Yammer’s social networking capabilities but also its viral adoption model. The latter proved prophetic. Just one week after the announcement, there were 15,000 employees signed up for Microsoft’s Yammer network. At the end of September, there were more than 64,000 members of the Microsoft network. And they’ve been chatty: employees posted more than 36,000 messages in the last month alone.
This blog is intended to share IT insights from my team’s experience integrating Yammer employees into Microsoft. I’ll use the Microsoft M&A Playbook phases [here] as a reference because it’s how my team frames the IT process for Venture Integration.
Pre-Planning Stage
Before any business transaction occurs, pre-planning activities set the stage. Microsoft CIO Tony Scott has a dedicated group within IT tasked with partnering with the Venture Integration team (the organization within Microsoft responsible for due diligence, planning, execution, and performance tracking of acquisitions, divestitures, and joint ventures). This approach allows IT to better align with the organization’s M&A strategy, which is important given the volume of acquisitions and divestitures that Microsoft does on an annual basis [source]. As stated in the M&A Playbook, we used our time during the pre-planning stage to identify organizational and cultural issues and the new organization’s technical capabilities, estimate a budget, evaluate potential risks and mitigations, and form our M&A due diligence team
My team worked towards achieving two main principles during this time: (1) make the acquired employees productive as soon as possible; (2) maintain a flexible IT staffing model.
With the Yammer employees, and before that with other acquisitions, we provided them with the necessary productivity tools by setting them up on Office365. This solution required no VPN and made collaboration easier. Yammer had a mixed device environment of PCs and Macs. We encourage employees to choose Windows devices – running Windows 8 – but for those employees who retain Macs we deployed desktop virtualization so they can run both. For developers needing Macs, their devices ran desktop virtualization software with a full Windows image, and employees used Windows to access line-of-business applications.
As for our staffing model, not everyone on the team is a full-time employee. I have strategic suppliers who can help my team scale up resources when needed. We work with 3 suppliers that typically play the roles of project manager, help desk support technician, and integration manager for a particular project. The number of full-time employees and suppliers working on the deal will be dictated by the deal’s size and complexity.
Day 0 Stage
This stage spans the deal announcement (June 25 for Yammer) until the deal is closed (July 18 for Yammer), and it includes due diligence and planning phases. The integration planning phase consists of determining the plan of action to complete integration of IT systems technology and the new IT organization.
Research indicates that some of the most unexpected and hard-to-resolve difficulties arising from an acquisition integration stem from cultural issues. In the case of Yammer, we knew its culture was steeped in data democracy and employee transparency. After all, those elements are reflected in the Yammer network. Accordingly, we chose to use Yammer’s Microsoft network as the communications tool between Yammer employees and Microsoft employees to discuss HR, IT and other integration elements.
Another important piece of IT integration here was single sign-on and Active Directory integration. Over the past couple of years we have prioritized developing our skills around Active Directory Federation Services [IT Showcase article here] so we can more quickly transition Microsoft credentials to employees of the acquired company. We’ve also found this work helps with audit and data protection. In the end, the Microsoft Network on Yammer went from 5,000 members to 64,000 members in a matter of weeks.
During this stage, we created and published a policy of Microsoft’s Yammer network to all Microsoft employees. The policy includes guidance to “Be Aware” of who you’re targeting your information to, and to “Be Smart” about appropriately protecting sensitive information. In addition to the use policy, we also drafted an FAQ that points users to relevant Microsoft policies for more information.
Day 1 Stage
The Day 1 stage is focused on IT integration. This stage can be a slow and gradual process in which the individuals from both organizations learn to co-operate in the transfer of strategic capabilities. As referenced in the M&A Playbook, CIOs should focus on managing the changes outlined in the planning stage, and also consider communicating their change management plan and associated timeline to their employees.
For all acquisitions, the IT portion of this stage is about preserving and enhancing the deal value drivers. For the Yammer acquisition, it meant retaining their momentum in the market. We used “Road Ahead” planning meetings from venture integration’s change management framework to get key stakeholders in the room to make concrete plans and execute against them quickly. For us, this means within 90 days of deal close we want 75%-90% of the heavy lifting done. This heavy lifting ends with a day we call “Microsoft Day”, which is when the acquisition’s employees become part of Microsoft’s payroll and benefits systems.
During this stage we also setup data monitoring of Microsoft’s Yammer network. We used the same techniques as used with SharePoint MY sites. We wanted to ensure data was appropriately stored in Yammer (similar to SharePoint sites and file servers). We also wanted to establish a process to identify inappropriate postings, sharing, and storage on Yammer. We also managed user authentication and authorization for accessing Microsoft and external Yammer networks. Finally, we worked to enable group lifecycle management via Active Directory group governance.
As my team moves forward, we’re planning to use Microsoft’s Yammer network for new deals. Our experience using Yammer made communications and sharing so much easier amongst the deal team and acquired employees. The team on both sides didn’t need corporate network access to share files, even files with high business impact data could be shared in a private group or private message.
If you want more details on Microsoft IT repeatable processes and technologies used for acquisitions, to include a view of the Skype acquisition, see this June 2012 IT Showcase article [here].
If you’d like to access to the IP in the M&A Playbook, please email George Anderson from Microsoft’s Enterprise Architecture IP team.
Tobias Klauder