NEW YORK and LONDON; March 20, 2002 – Close to three quarters of executives in North America and Europe do not realize the important role information technology (IT) plays in the success of a merger or acquisition and in turn may be forgoing financial rewards, an Accenture study reveals today.
Future successes in M&As may be even harder to come by when one considers that 67 percent of respondents report that the IT function is not part of their agenda in the early stages of a deal and is usually discussed only after the transaction has been publicly announced.
Furthermore, less than 50 percent of the companies surveyed perform detailed IT integration planning. Equally significant, among those companies who performed IT due diligence, 70 percent said subsequent integration was a success, compared to 18 percent for those who did not report the deal a success.
“Keys to the Kingdom: How an Integrated IT capability can increase your odds of M&A success”, is the first in-depth study on the impact of IT integration in an M&A deal. The research uncovered that IT integration activities throughout the lifecycle of an M&A is a strong contributor to its overall success. Companies with effective strategic IT integration are more likely to achieve better financial results and are more likely to describe the deal as a success.
The truth about M&As is that about half of them either fail outright or else fall well short of the value they’re expected to bring because when viewed unilaterally, IT integration can wind up crippling rather than enabling the new organization,” said Gary Curtis, global head of Accenture’s Strategic Information Technology Effectiveness practice.
Another finding supporting the importance of IT in shaping a successful M&A is that of the deals that were more successful financially, 71 percent of the executives said they had a vision of the future IT capability in place. In other words, the future IT organization and its capabilities must be an outgrowth of the future business organization and its capabilities.
“Mixing business strategy with technology is imperative in an M&A success. If companies can quickly get their IT leadership involved in the business planning, the IT function will be better able to develop a technology approach that truly enables business integration,” added Gary Curtis.
The study also found that those companies who appointed a dedicated IT integration team and manager to oversee the process were critical to the deal’s success. Seventy-three percent of companies who described their merger as successful had a full-time IT manager assigned to the integration endeavor compared to 40 percent who did not describe the integration a success.
Accenture is the world’s leading management consulting and technology services organization. Through its network of businesses approach — in which the company enhances its consulting and outsourcing expertise through alliances, affiliated companies and other capabilities — Accenture delivers innovations that help clients across all industries quickly realize their visions. With more than 75,000 people in 47 countries, the company generated net revenues of $11.44 billion for the fiscal year ended August 31, 2001. Its home page is www.accenture.com.
About the Survey
Accenture studied 57 post M&A IT integration projects in the US and Europe from 1997 to 1999 allowing for the integration effort to be monitored and analyzed for up to 24 months after the deal was completed. Accenture specifically surveyed IT managers or directors with responsibility and knowledge of the IT integration effort. Target company sales were at least $100 million and combined sales of $500 million. The deals were in multiple industries. European countries surveyed included Finland, France, Germany, the Netherlands, Norway, Sweden, and the UK. Accenture’s financial rating scales included Return on Sales, Return on Assets, and Return on Net Worth.