Will your acquisition add value?
More than two thirds of acquisitions fail to create meaningful shareholder value. The majority attribute this to one or more of: unrealistic expectations; a lack of sufficient pre-merger due diligence; or under-estimating the difficulties involved in integrating operations, processes, systems and technologies.
Strategy consultants Bain & Co rank the ability to successfully integrate acquired companies as the single most important factor influencing acquisition success. It is not surprising, therefore, that integrating the back office often represents the biggest challenge in realising the value of a deal, where over 50% of the synergies can be IT-related.
Delivery of the IT benefits of a merger or acquisition is typically in three phases: day 1 imperatives, year end transition projects, and the post-merger realisation programme.
Day 1 Imperatives
There will be a small number of critical business objectives for day 1 of the merged business, such as delivering a consistent brand to customers. These objectives provide the short term focus for all the integration teams. For IT, this often means:
- re-badging existing web sites
- providing new external email addresses for all staff
- integrating phone and address books
- providing the ability to transfer phone calls between legacy buildings.
The financial markets usually only like to see exceptional one-off transition costs in the accounts for the year of the merger or acquisition. After that, although integration activities continue, they will be delivered as part of the new business-as-usual operations. As a result, the financial year end often becomes a hard date for the next wave of integration deliverables. The amount of time left in the year will dictate what can reasonably be completed. IT projects may include:
- consolidating data centres
- linking email, voicemail and networks
- consolidating IT procurement
- consolidating financial systems, chart of accounts and reporting
- consolidating HR data
- eliminating redundant positions in the emerging IT organisation.
While the first two integration phases are underway, a separate team works with the business to update (or replace) the IT strategy in line with the new business strategy. This sets the stage for the longer term projects, that are generally more difficult and time-consuming, such as:
- standardising and converging enterprise systems (e.g. ERP, CRM, Supply Chain)
- consolidating the application portfolio
- standardising the infrastructure
- transforming the IT organisation.
