M&A Activities

 

In most of the conversations where M&A activity is a topic, especially in the packaging industry, the common theme is about successfully combining the people cultures of both organizations and ensuring a complete and successful change management process. While it has been proven that not paying enough attention to the successful integration of work and people cultures has contributed significantly to the failure of some high-profile mergers, the same can be said of processes and technology. The rapid pace of change bought on by mergers and acquisitions can cause major disruptions to established workflows, create havoc in whole departments and can often result in lost profits and unhappy customers.

Recent M&A trends reports pointed out three top reasons (beside revenue improvement) why companies choose to acquire or merge with others:

  1. Expand customer base in existing geographic markets
  2. Expand/diversify products or services
  3. Acquire technology

M&A Value Creation: An IT Perspective

With most M&A worthy companies using large and complex ERP systems like SAP and Oracle, value from an acquisition depends on successful integration which for most companies requires “end to end” IT engagement. There can be no doubt that increasing business value is a key driver behind most mergers and acquisitions. At the same time, outlining the role of IT systems in supporting M&A activity is critical considering the complex nature of such an undertaking. The key element in all of this is enabling IT to support differentiating business functions, since augmenting core processes should be an underlying objective of any acquisition. Some key elements of IT value creation could include:

  • Improving IT capabilities to support the reasons behind the merger. Enhancing production synergies through tighter control and coordination of manufacturing assets; improved profit margin protection, increased sales and access to larger market opportunities.
  • Assuring end-user satisfaction with the integrated systems. It is important to avoid disruption as much as possible with your employees; and avoid at all costs disruptions and inconveniences to your customers.
  • Improving the IT operating model. This is a great time to take a holistic analysis of how both organizations have been operating the “Business of IT” and make the critical adjustments necessary to ensure that IT stays aligned with the needs of the business post-merger.

How IT Can Support A Successful Merger

McKinsey, in their 2011 Quarterly newsletter noted that “IT can be a powerful factor behind M&A success, assuring synergies are realized and ultimately increasing the deal-making capacity of acquirers.” If the IT systems of both the merging organizations are properly and thoughtfully integrated with the existing and ‘to be’ processes, significant impact and business value can be obtained. For example, the packaging industry has seen significant M&A activity over the past 20 years. Each of the participating companies has no doubt made significant investments in technology to support their core business functions such as sales, marketing, estimating, quoting, pricing management, manufacturing and logistics. It is therefore imperative for IT to thoroughly understanding the business needs of the merging entities and be able to align these with the proper supporting technologies, even if this means going to outside consultants and vendors for the additional tools and resources.

Following are just a few of the keys ways IT can play a major role in supporting a successful merger:

  • Reducing overlap of IT in the merge companies by rationalizing application portfolios and IT organizations.
  • Optimizing infrastructure landscapes and determining operating models for the new entity.
  • Enabling synergies by integrating major business functions, improving communication, enhancing processes and providing uninterrupted customer service, both internally and externally.

Don’t forget IT.

Of course, the comments mentioned in this article represent some pieces of the puzzle when it comes to post merger business and technology integration. If this material urges your curiosity to learn more, please contact us: sales@aicomp.com.

 

By Christopher Hale
Creative Technologist. Writer. Author. Sales Representative