Updated: Nov 15, 2021
In the previous posts in this series focusing on M&A, I’ve looked at the benefits of cutting-edge technologies in the run-up to acquisitions. This month, I’ll be zooming in on the phase following the deal – and more specifically on the role of technology in smoothing the all-important post-merger integration of acquirers and targets. Read on to find out more.
Seamless Integration: the Key to Successful M&A
In the current economic climate, mergers and acquisitions pose a whole host of challenges: Companies now have to contend not only with the rising number of M&A deals, but also with the growing number of technologies and applications, as well as ever-greater pressure.
In today’s increasingly digital world, IT is the beating heart of many companies’ business and is therefore a key enabler of coveted post-merger synergies. So, if acquirers are to reap the rewards M&A, it’s essential that they ensure their IT structures and operations meld seamlessly with those of their acquisitions.
Recent studies underscore just how important it is to avoid post-merger mismatches. Researchers have found that integration issues are the main reason that a staggering 70 to 90% of acquisitions fail. What’s more, inexperienced buyers have a greater than 50% chance of finding themselves in worse financial shape three years after a merger than they were in before.
When Even the Best Due Diligence is Not Enough
These figures may be sobering, but they’re not entirely surprising. While conventional due diligence certainly delivers valuable insight ahead of an acquisition (particularly if you deploy the latest analytics solutions), it can seldom predict whether your established IT teams and applications will ultimately play well together with those of the target.
But that’s not all: Even the most conscientious due diligence is unlikely to reveal whether the target’s legacy IT applications will align with your company’s strategy going forward. And finally, acquiring additional software through M&A can drive up running and licensing costs in ways that are hard to predict – and can even result in operational inefficiencies.
Mastering the Challenges of Post-Merger Integration
Fortunately, there are a number of proven approaches you can adopt to navigate the hazards of post-merger integration (PMI). First, IT leaders from the acquirer and target should be enlisted to oversee architecture shifts and technology integration. In addition, they should collaborate closely to create a working environment that is fosters teamwork. After all, tech integration is as much about people as it is about bits and bytes.
Every merger is about achieving synergies. And, as already mentioned, many of these are now technology-enabled. That’s why it’s essential to assess the IT capabilities of the pre- and post-deal companies and pinpoint the applications that will help achieve synergies – and the ones that won’t.
One way of doing this is by deploying the latest analytics solutions and AI. These technologies can provide an X-ray image of the two companies – including their IT organizations and landscapes – enabling you to accurately determine where synergies can be achieved and where there are gaps to be filled.
Leveraging Data to Pinpoint Synergies
State-of-the-art data-driven tools can also help you spot potential synergies and optimize your business activities – for example, by automatically tracking synergies and adapting forecasts based on probabilities. This enables you to identify and calculate efficiencies that can be achieved by updating legacy systems and consolidating data centers and platforms, for example.
The bottom line: Technologies like these enable tighter IT integration and deliver greater transparency for your M&A, especially when it comes software inventory.
How You (and Your Customers) Benefit from Successful PMI
Getting PMI right has many benefits for your company and customers alike. Optimized integration between IT teams not only enables individuals within the merged organization to collaborate more efficiently and effectively; it also helps you ensure that your IT delivers your services faster, ultimately boosting end-customer satisfaction.
The efficiency gains fueled by tight post-merger integration can also enable you to realize significantly more synergies than would otherwise be possible. Most companies can realistically expect their M&A transactions to achieve 10–20% of the potential synergies. Where PMI is successful, that figure can rise as high as 60%.
Adopting an effective PMI approach enables you to sidestep post-merger pitfalls and reap the business benefits of a tightly integrated organization. But identifying potential synergies and drawing up and implementing the post-merger acquisition strategy that’s right for you can pose challenges of its own.
Companies merge for many different reasons, so there’s no one-size-fits-all approach. Accenture can help you identify the overall M&A strategy that’s best for your particular needs and goals. What’s more, we can advise you on streamlining your IT and business strategy – a key consideration for successful PMI.
To find out more about how Accenture can help you achieve synergies and maximize the benefits of your mergers and acquisitions, feel free to reach out to me.