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- With every key business function now enabled by information technology, and IT
increasingly at the heart of business models, effective consolidation of IT systems
is essential to the success of any business merger. Most merging companies seek to
gain operating efficiencies by rapidly consolidating business operations. Crafting
the right IT strategy for the merged companies requires a balanced appreciation of
the factors that drive and constrain the merger, and careful selection of the merger
strategy that will best achieve merger goals given those factors. Common IT merger
strategies, each with distinct advantages and disadvantages, include:
Absorption: Acquiring company installs its systems and technology into the
acquired company. Advantages include fastest path to a single company operation,
familiar systems and the lowest overall IT cost. Disadvantages include required
business process changes in acquired company and potential for significant disruption
to the acquired company.
Best of Breed: Companies conduct a joint assessment of application systems supporting
each business function in each company and select the “best” alternative. Advantages:
potential for better functionality over time and better “buy-in” by the merged organization.
Disadvantages: slower implementation, required changes in both companies and a major
integration effort.
Transformation: The merged companies agree to install new systems and technology
– i.e., Customer Relationship Management (CRM) or Enterprise Resource Planning (ERP)
– or an industry-specific software package. Advantages include achievement of a “best
in breed” environment. Disadvantages include extensive time required to implement,
cost and potentially major integration work.
Maintain IT Autonomy: The acquired company retains its IT systems and is
interfaced to the acquiring company as required (e.g. Accounting/Financial Reporting,
Human Resources, etc.). Advantages include minimal impact to both environments.
Disadvantages include lost financial and operational synergies and continued higher
costs associated with maintaining two environments.
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Once the IT integration strategy has been chosen, the
merged companies may explore engaging a third party to outsource information technology for both environments
or, on an interim basis, outsource the acquired company’s IT with the plan to integrate at a later date.
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