Breathless press release just in from Ernst & Young wins this month’s award for stating the bleedin’ obvious…
Tony Qui, partner in Ernst & Young’s Operational Transaction Services, will reveal this week that IT and operational considerations are not always given adequate attention in planning and execution phases of mergers and acquisitions in his speech at the SAP conference, Sapphire Now. In his speech, Tony will reference the firm’s recent survey of 220 C-suite and board level executives, which found that 37% of the respondents felt operation and IT issues presented the most significant challenges post-transaction.
Using the Ernst & Young survey data as background, Tony Qui will demonstrate that failing to adequately understand and address the IT challenges associated with successful M&A can lead to value erosion or deal failure. He will cite that 47% of those surveyed in the Ernst & Young survey said that more detailed IT due diligence could have prevented value erosion. Furthermore, he will demonstrate that IT can become a key vehicle for growth and value creation if leveraged early and effectively in M&A transactions.
Tony Qui said: “Our findings clearly show that technology needs to have a seat at the M&A table in order to deliver real value. Our survey found that only 50% of respondents said they typically involve IT in the transaction process – compared to nearly 80% who involved the finance department.”
He continued: “The due diligence that must be conducted should focus on improving earning opportunities, and identifying key deal breakers to avoid unplanned investment. It’s about connecting IT issues to the strategic motivation for the deal. An integration blueprint and roadmap can be built and set to realistic, deliverable timeframes. Giving IT a seat at the table from the start of the process helps a deal move from integration to innovation.”
COMMENT: Given that in the early years post-Big Bang, at least one major building society merger had to be called off post-agreement when it was discovered that the cost of trying to merge the two IT systems would have destroyed the value of the merger and trashed the companies finances for several years, you have to wonder how stupid some C-level executives must be if the don’t recognise the IT issue. Closer to home, when Clifford Chance did their big US merger with its January 1 2000 go-live, the firm’s then CIO said they had two immediate IT priorities – a combined email system and a firmwide conflicts of interest checking system.