M&A Information Technology Best Practices

Chapter 2

The Role of IT in Mergers and Acquisitions

Peter BlatmanEugene Lukac

The rationale frequently behind prospective mergers and acquisitions (M&A) transactions is the expectation of specific business benefits such as increased market share, reduced joint operating costs, and a more integrated value chain. These potential M&A-related benefits are usually directly linked to anticipated synergies, including, but not limited to, shared overhead, economies of scale, cross-fertilization, greater market access, and operational integration. What is sometimes overlooked or underestimated is the crucial importance of effective information technology (IT) integration in achieving anticipated synergies. Examples include:

• Shared overhead. Reduction of IT support costs through consolidation of IT platforms.
• Economies of scale. Shared IT procurement and maintenance.
• Cross-fertilization. Mining of joint customer and vendor database information.
• Operational integration. Integrated purchasing, production/manufacturing, forecasting, and logistics systems.

Evidence of the importance of IT to achieving M&A-related benefits is reflected in numerous market studies over the past 10 years that indicate 50 to 70 percent of M&A transactions fail to ultimately create incremental shareholder value.¹ While there are many reasons for the low rate of success, failed post-merger integration stands out as the most common root cause.

This chapter addresses the essential role IT should play in the full cycle ...