It’s not often that a quote about technology still holds true after nearly twenty years, but when it comes to mergers and acquisitions (M&A), never have these words been truer than today.
"Information technology and business are becoming inextricably interwoven. I don't think anybody can talk meaningfully about one without talking about the other." – Bill Gates, in 1999.
As business strategies and goals are evolving, so must Information Technology’s (IT’s) approach to M&A integration, to meet the requirements of shrinking close windows and enable increasingly aggressive synergy targets and new business models. As evidenced in a recent Accenture Strategy survey of 1,100 C-level executives, technology is a key driver to M&A outcomes, both as an enabler to capture value faster, and as a new category of assets and capabilities for the business.1
The time to plan for integration is getting shorter
Based on Accenture Strategy research2, the average integration planning time from announcement to close is shrinking from a period of up to twelve months to less than 120 days. Even complex global deals, which historically would have a close window of six to nine months3, may now close as quickly as 180 days from announcement.
Digital transformation is disrupting the traditional M&A costs synergy levers
Digital transformation is now impacting companies’ core business strategy. Companies’ need to embrace new technologies and the complexity of the digital ecosystems is driving to new M&A decisions and ways of thinking, impacting both operating and financial models. Our recent survey shows how the goals for M&A events are changing, with “acquiring a new digital capability” and “needing a next-generation technology” rivalling traditional reasons such as expanding into new industries or geographies. Digital acquisitions do not follow a conventional cost-driven acquisition business case, and 61 percent of companies are already using a different valuation and cost model for such transactions.4
The traditional IT integration model may not work in the new digital world. Fifty-eight percent of companies are considering acquiring a digital company—deals that typically fall outside of their core business. Of the companies that already have acquired a digital company, 64 percent decided to keep the digital company running as a standalone business afterward.5
Embrace the dichotomy and flexibility of multi-speed IT
To be successful as a business partner throughout the M&A event, IT leadership should seek to understand the transaction’s business objectives, associated target operating model, and financial case. IT then can tailor a fit-for-purpose integration approach focused on enabling the key value drivers, business operating model outcomes, and speed to integrate. While a conventional approach—such as full integration of the IT services, optimization of the application portfolio, and rationalization of Enterprise Resource Planning (ERP) systems—would drive synergies in a typical merger integration, it does carry a significant risk of culture clash for a nimble, agile digital organization integration, and could lead to significant business loss of core talents and capabilities.
IT must enhance its partnership with business counterparts, embrace the dichotomy and flexibility of multi-speed IT, and rethink its integration strategy to enable the new digital business integration goals, or be left behind as a “legacy cost center,” rather than a digital value enabler.
1 Accenture Strategy, "M&A: From Art to Science," 2017
3 Merger Market, Reuter, various companies’ financial reports: Public M&A Transactions Data
4 Accenture Strategy, "M&A: From Art to Science," 2017