Making a Merger Succeed

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Demonstrating return on a merger or acquisition takes patience, planning—and the early involvement of the technology department.

Industry analysts estimate that anywhere from 40% to 80% of M&A transactions fail to create shareholder value; according to Accenture, the key to achieving greater—or any—success often depends on the combined company’s ability to implement a clear technology integration plan, quickly.

Which systems should you elimate after a merger?
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In a recent study of 57 post-merger technology integration projects, Accenture found that of the M&A deals that showed the greatest financial success, 71% of executives said the mergers were driven by specific technology goals. On the other hand, only 35% of the less-successful companies had had similar visions for their technology capabilities.

Technology departments need to act at the first opportunity to extend their shared data systems, says David Hough, director of supply chain management and health care at PSC, a technology consulting firm based in Schaumburg, Ill.

“You want to get that information in a single place so you can make corporate decisions,” he says.

Early integration of such core components as e-mail and intranet/extranet systems benefits public relations and employee communications, yet also helps the companies conduct critical due diligence. Setting up such collaborative systems and data flow enables both organizations to understand the other’s support structure, service levels, network architecture, security model and policies. Only after that point, says Hough, does it make sense for firms to “look at changing systems for purposes of production efficiency.”

The acquired firm typically adopts the host company’s back-end applications, such as financials, human resources and payroll. However, deciding which front-end applications to integrate and which to shelve is often less clear-cut, especially when multiple vendors are involved. Customer relationship management, manufacturing and financial applications that require custom development, for example, can be extremely difficult to extend.

As a result, opting for the processes of the larger company may not always be the right or obvious choice. Baseline has created a simple assessment tool, above, to help companies consider whether their technology application portfolio holds promise for increasing operational efficiency in a post-merger environment.