IT as a driver of M&A success
5 ways businesses are achieving M&A success through IT
IT can be a leading vehicle for growth and value creation if leveraged effectively in transactions.
Our survey highlights the opportunities in leveraging IT to drive success in mergers and acquisitions (M&A). Executives too often place inadequate focus on IT leading to value erosion or even deal failure. We also revealed the challenges and risks that IT can present in the transaction process.
- Embed IT into your approach to transactions
IT underpins all business functions however, only 38% of corporate and 22% of private equity respondents say they put a significant emphasis on IT as part of their approach to transactions.
Dependency on IT can present a platform for business opportunity through innovation, or can present risks such as higher costs, lost synergies and unmet deal objectives.
Globalization adds a new layer of complexity; IT often proves a costlier and more time-consuming element of transactions than anticipated.
- Give IT a seat at the table from the start of the deal
Our survey found that only 50% said they involve IT in the transaction process compared to almost 80% for finance. Many reported inaccurate cost estimates and timelines as a result.
"You need to build the appropriate IT costs into your investment case to avoid major cost overruns," says Tony Qui, Partner at Ernst & Young LLP.
- Understand the strategic value of IT to focus efforts and maximize returns
One theme of the qualitative feedback was connecting IT to the strategic drivers behind a transaction: consolidating product ranges, increasing market share, entering new markets or gaining new customers all rely on a reorganization of the business.
Understanding these strategic drivers at C-suite level will help focus IT transaction efforts.
- Plan for day one with a view to day one-hundred
Including IT in the due-diligence stage can help a company to move from integration to innovation. Moreover, a lack of IT due diligence in the pre-deal stage is linked to value erosion.
Respondents pointed to day one business continuity and data migration issues as major challenges. Many also reported the need to develop a long-term view of whether IT systems needed upgrading or replacing entirely. These changes can directly affect the value of the deal and the planned synergies.
- Critically assess the skill set needed to deliver the deal
The skill set required to make IT an integral part of business strategy is not necessarily present in companies' internal IT teams. Approximately half of survey respondents (48%) engaged third-party advisors to aid pre-deal IT due diligence and more than half (55%) enlisted third-party help for the post-transaction phase.
The combination of transaction experience with a depth of IT knowledge can lead to a higher rate of deal success.
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