Amazon acquired Whole Foods. CenturyLink merged with Level 3 Communications. Verizon acquired Yahoo. These are just a few examples of the high-profile Mergers and Acquisitions (M&As) that were announced in 2017. In today’s competitive business environment, M&As have become strategic tools for boosting growth and power, breaking into new markets, and increasing innovation and relevance in the market. In fact, in 2017 alone there were about 50,000 M&A deals announced worldwide, averaging 137 per day. .
While there is an abundance of M&A transactions, 70-90% of them fail to meet the primary goals of the deal. So, why do companies keep pursuing these transactions? It seems that the potential rewards outweigh the possible risks. Is there a way to ensure positive results rather than mediocre outcomes?
M&A transactions include several complex moving pieces. One important factor of a successful merger or acquisition is timely and secure data integration. In 2016, 34% of financial services companies cited an “underestimation of IT challenges” as the reason for M&A failure. Merging IT solutions can include data aggregation, combining of data warehouses and disparate data sets, and implementation of new tools and applications to process the data. To solve this problem, the acquiring company must become more agile at pre-M&A analysis and post-M&A IT and data integration.
Tips for successful M&A data integration
Companies can take an agile approach to merger & acquisition transactions, especially when it comes to data integration. There are a few planning tasks to focus on that will lead to a smooth integration process.
Thorough due diligence
A comprehensive discovery phase pre-M&A creates a realistic picture of what both companies are walking into. During the due diligence process, the scope and details of both IT infrastructures should be identified with details including data storage, basic infrastructure, and a catalog of the various IT applications in play. It's important to identify all data sets, including duplicate data and legacy data. Companies can leverage cloud-based tools that unify the data from the two systems into a separate hub for the two companies to compare and analyze data. This process reveals trends across the disparate data sets and determines what data would be useful to merge if the deal were to take place.
Once it is determined that a Merger or Acquisition is a viable and valuable business decision and the transaction is finalized, the hard work of developing the strategy to merge the two companies starts. Based on the findings of the pre-M&A analysis, it should be determined how the existing IT solutions will be combined and what new solutions need to be built to support overall growth. A data governance strategy should be defined to identify how people, data management, and data storage systems will all operate efficiently together. From there, companies can drill down to specifics about which tools are needed to store, manage, and visualize the data. Once the data governance strategy is outlined, the implementation timeline can be developed and need for resources, including project managers and developers, defined.
Change management principles should always be at the forefront of any kind of business change, especially M&A transactions. Implementing change management mechanisms starting directly after the deal is signed will ensure that employees are on board with the change and can be part of the driving force for a successful transaction. To minimize resistance to the change and gain company-wide support, transparency is key. Inform all employees of the upcoming changes. Understand how each person’s job might be affected by the change and gather insights from employees on how current processes can be improved. Train employees how to use new tools and systems. Finally, assign point people at every level of the company to advocate for and drive the change. Daily users and administrators of the IT system will be the best source of information about how to merge and improve the system, so it’s important to include them in the planning and implementation discussions.
With better focus on due diligence, strategy, and change management, companies can prevent some of the following common pitfalls that occur when integrating the acquired company:
• Challenges with business continuity
• Employees feeling confused or blindsided
• Degraded customer experience due to problems in the IT solutions
• Inaccessible or incompatible Data and/or IT solutions
• Disrupted daily business operations due to any (or all) of the above
Companies large and small have embraced the competitive advantage that M&A transactions offer, and this trend is expected to continue to grow. As companies combine efforts and build alliances, it is important to include IT and data integration at the forefront of deal discussions and evaluations. In today’s data-powered world with data fueling everything from essential management systems to customer-focused AI solutions, lack of planning can be detrimental to business initiatives. If companies can learn to integrate and optimize IT solutions and data in an agile fashion, they will be on their way to more successful M&A transactions.
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