Moregate Consulting
The Value of IT in M&A
Does IT drain value from the acquisition or does it add value? As 50% of synergies are IT enabled, a haphazard approach to IT can drain value from the post acquisition integration.
Many mergers and acquisitions don't live up to expectations and the objectives set at the outset. We know that this has many causes such as an ill-conceived strategic mandate, lack of M&A experience and over-paying, just to name a few.
Here, we focus on the role IT can play in the success of acquisitions. We have all heard about deals made in heaven, but when it comes to integration, synergies are elusive. In many of these cases financials and strategies are complementary, but IT and operations have been neglected from the outset, because they don't receive sufficient consideration pre-deal and during due diligence.
CIO's and operations directors are not at the top table during pre-deal negotiations or due diligence. This is a suprise given that many deals rely on supply chain synergies, operational consolidation and greater process efficiency. IT plays a crucial role in all of these.
How can the management team accurately forecast synergies without any input from the specialists?
The contrary is true as well. If IT strategy supports the merger strategy, organisations can capture a broader range of synergies, and at a faster pace. Not only would this increase the likelihood of capturing synergies, but organisations would also be more successful at sizing up targets and executing their acquisition targets.
The solution is simple, as companies plan for acquisitions, IT must have a seat at the due diigence table. The team can then spot potential obstacles to integration such as incompatible platforms that need investments and workarounds, and potential liabilities such as massive underinvestment or failure to comply to governance requirements.
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