Information Technology leaders can significantly contribute to mergers and acquisitions of organizations provided they are involved in the early stages of these processes. However, there is one important limitation, the IT teams can significantly sway the outcome of the mergers and acquisitions only if the IT infrastructure of the parties is integrated, planned, and run to sustain the merger and acquisition efforts during and after the deal.
A creation of a model or a template by the IT professionals that can be easily communicated to business professionals can significantly address the contribution of the IT infrastructure to the value of merger and acquisition virtually at every stage. The business executive should observe the IT infrastructure in the same context as any other strategic, value-generating component of the enterprise. This is of extreme importance to determine the justification of business return from the merger or acquisition.
Post-merger Integration Dilemma
Many IT leaders and managers face this type of challenges when faced with merger and acquisition integration phase especially when their organization in not a seasoned acquirer.
Information Technology teams are left out of the merger and acquisition process until after the merger or acquisition takes place and they are left to settle the countless and complex aspects of the IT processes of the two organizations constrained with limitations of deadlines and high expectations of economic efficiency that raises many problems. Most of the organizations depend heavily on Information technology systems for transaction coordination, operation management, sales and services’ support, and provisions of other services around the emerging world of digital technologies. Despite all that the aversion of disruption on IT dependent processes and technologies is often an after though for many organizations going through merger and acquisitions considering the fact that the two organizations coming close may relying on entirely different infrastructure and technologies.
Many experienced acquirers create great value in their integration and mitigate risk by involving IT in a much early stage of the process – at the very beginning. One example of such an acquirer is EMC. EMC is the world leader in data-storage equipment provider. EMC has made it a best practice to ensure the involvement of IT presence immediately after signing a letter of intent. As IT integration is central to the EMC merger and acquisition integration efforts, the presence of IT in this process broadens the narrative and highlight the potential areas of opportunities, operational challenges and risks.
Contributions that IT can Make to Mergers and Acquisitions
IT certainly is not the single force behind a corporate mergers and acquisitions, the importance of its involvement has been realized since a very long time. IT can be a huge factor in the success of a merger and acquisition assuring that synergies are realized with their full capacity. This in turn increasing the deal-making capacity of the acquirers. IT has emerged and recognized as the key factor behind process optimization and business transformation that impacts and supports a variety of highly apparent factors that facilitates business value. In some cases, IT alone is capable for establishing overall value.
In the following, these are the key areas where IT plays a major part in IT activation or as a standalone function.
- Support businesses to save cost by combining the IT cost structures.
- Reduction of IT overlap in the merged companies by rationalizing the applications portfolios and IT organizations.
- Optimization of infrastructure landscapes and pining down the operation models of the new entity.
- Integration of major business functions, communication improvement, process enhancement and uninterrupted customer service provision through synergy enablement.
- Enhanced provision of operational visibility during the integration process through the utilization of various communication channels and knowledge sharing portals.
Recent research has revealed that about 50% percent of the merger value is offered by IT synergies. The downturn is that in most of the mergers and acquisitions the significance of IT is ignored by top management and the IT teams either is sidelined or the IT operations are put on back burners during planning and pre-close which is a huge mistake and breeds even a greater inconvenience when IT teams expected to deliver greater results. The proper involvement of IT can not only speed up the integration process but gives an open horizon of opportunities for the creation of greater values with a fast pace to any merger and acquisition.