Mergers and Acquisitions: Why they can’t work without IT

Companies want to grow in order to secure their market position and so they merge with or take over other companies. However, what most people forget is how the success of such transactions is linked to the IT infrastructure.

When it comes to mergers and acquisitions, information technology is not usually a priority. But when integrated into planning at the early stage of M&As, IT can create important synergies. IT is the basis for more efficient processes, optimised cross-selling and high availability of information and know-how. Not paying attention to fundamental IT structures during M&A activities can often have dire consequences and result later in the need for enormous HR and financial investment.

Mergers certainly pose considerable challenges for IT as servers and IT structures from different companies now have to be combined and integrated. All too often, little or no attention is given to the processes that run in the companies, simply due to a lack of networking transparency, both within an department and between departments. On top of that, during reorganisation, applications are usually only sporadically analysed with a view to their benefits and efficiency, so that all too often they are “cleared out” or adapted on a trial and error basis during mergers.

The fact of the matter, however, and this comes as no surprise, is that there is indeed a positive link between transaction success and top management’s interest in IT topics, as was found by consulting firm Deloitte in September 2014 in its study titled “Dear CFO, why IT does matter within M&A transactions?”. According to the study, around 70 to 80 percent of the firms polled underestimated the importance of IT during mergers and saw it merely as a support function. A surprising outcome, considering that according to the study IT had a key role to play in the success of a transaction.

Individual solutions lead to transaction success

Almost 60 percent of the firms polled rated their own M&A activities as excellent or good, even though more than half of the mergers had failed. What these firms are unable to see is that many areas, such as R&D, sales and customer service, depend on IT.

Since transactions are complex and cannot be handled according to one permanent scheme, companies need an individual solution for each application case. However, individual solutions require technologies that permit just that. But many firms still cling to old structures, relying on obsolete computer centres rather than using flexible as-a-service solutions or managed services, i.e. next generation IT. By doing so, they are missing out on the opportunities that arise during a merger or takeover which allow easier integration of workflows and a faster response to the needs of the market – not to mention reducing costs for maintenance and updating.

Conclusion: Adaptable IT is the key to successful M&As and growth. Both IT and management are called upon to keep a close eye on the solutions available, to shape more transparent structures and to integrate IT into the transaction process.  The use of IT-on-demand services as a fast and flexible solution can help to reorganise and adapt the company structure. Especially when it comes to complex processes and large data volumes which have to be integrated, managed services are a useful option. Through central control, all the partners involved can create a common, standardised basis and optimise workflows across the board.

Author: Andre Kiehne

Director Solution Sales, Microsoft Germany GmbH

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