=Paper=
{{Paper
|id=Vol-2749/short2
|storemode=property
|title=Importance of IS in Mergers and Acquisitions
|pdfUrl=https://ceur-ws.org/Vol-2749/short2.pdf
|volume=Vol-2749
|authors=Ksenija Lace,Marite Kirikova
|dblpUrl=https://dblp.org/rec/conf/ifip8-1/LaceK20
}}
==Importance of IS in Mergers and Acquisitions==
https://ceur-ws.org/Vol-2749/short2.pdf
Importance of IS in Mergers and Acquisitions
Ksenija Lace and Marite Kirikova
Riga Technical University, Latvia
ksenija.lace@cs.rtu.lv, marite.kirikova@cs.rtu.lv
Abstract. With the growing competition, many companies are merging
together to get competive advantage [1]. Post-merger integration (PMI) is the
process of integrating two or more organizations together in a scope of Merger
& Acquisition (M&A) initiative. Current PMI research can be divided in two
main parallel streams – PMI of strategy and organizational structure, and PMI
of information systems (IS). However, each organization is a complex system,
which should be viewed from different interrelated aspects, such as personnel,
culture, infrastructure, product portfolio, processes, etc. With this, it sounds
reasonable to research PMI as a holistic integration of several socio-cyber-
physical systems (SCPS). This paper focuses on the existing PMI and IS PMI
research literature review to summarize existing knowledge in these areas, as
well as to state main questions for the future SCPS PMI research.
Keywords: mergers, acquisitions, post-merger integration, PMI, M&A, IS
PMI
1 M&A and PMI Strategies
PMI is perceived as a part of merger and acquisition (M&A) initiative, that happens
after all formal merge processes are executed and real integration of two or more
organizations starts [2]. According to the statistics, 2/3 of M&As fail [3], and it is
stated that post-merger implementation (PMI) has a big impact on the overall M&A
success [2]. One of the reasons for this is unaligned M&A and PMI strategies and
lack of planning.
In the existing research, main M&A strategic objectives are [2], [3], [4], [5]:
• Company and market share grows
• Resource and process base strength
• Expansion of product portfolio
• Reserch and design (R&D)
• Industry convergence
In other words, M&A goals are different types of reconfiguration of the organization.
In order to achieve them, there should be a clear PMI strategy, answering the
following questions [4]:
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Commons License Attribution 4.0 International (CC BY 4.0).
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• What is the integration scope – what are system parts that should be integrated:
resources, lines of products, business units, target top management teams,
systems, etc. [4]
• For each of parts selected for integration – what is the integration approach:
absorption, symbiosis, preservation, holding [1], [3].
As one of the main success criteria for PMI is defined the integration of involved
systems, with a quality and scope leading to the synergy [6]. But synergy can be
treated in many different ways and there is no easy way how to measure it.
So, future research could elaborate more on PMI goal linkage to M&A goals,
structuring them into all three perspectives: cyber, physical and socio, as well as PMI
goal decomposition and result evaluation for each of listed perspectives.
Besides M&A strategic goals, PMI strategy is also impacted by the context in
which it is executed, and PMI decisions depend on the different contextual factors [1],
[6]:
• Organizations size and structure
• Time limitations
• Organization industry sectors
• Level of equality between merging partners
• Degree of previous collaboration between merging partners
Future research could focus on more detailed model of influencing factors and
related decision making process, leading to the specific PMI characteristics.
2 IS Integration Role in PMI
As already mentioned in Section 1, PMI is the crucial part of each M&A initiative.
And major part of identified problems in M&A are linked directly to information
systems (IS) PMI [2], [7]. Despite this, PMI research is still primarily focused on
strategy and organization PMI, not IS/IT.
There should be more attention to IS PMI due to several reasons:
• IS integration is a complex process, which requires time and extensive resources
[2]
• Nowadays IS is the central part of any business process. Organizations literally
depend on the quality and accessibility of information in IS [2], [6]
• Such enterprise systems as ERP, SCM, CRM are the key elements in
organization functions [3]
• IS is a crucial for customer services, all problems in IS (like errors and lost data)
could lead to customer loses [2]
So, IS PMI should be the integral part of PMI process. But, yet again, IS PMI
should not be treated as a separate activity, but rather as a cyber part of SCP system
PMI. We may need additional research in the areas how to incorporate IS integration
part into strategic/structural integration:
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• Include IS integration activities into each step in overall PMI process, starting
with planning and ending with result evaluation, so that IS PMI support effective
and efficient M&A [6]
• Link high level M&A and PMI goals with IS PMI goals to align all three
integration aspects [6]
Here we could come to one more challenge for IS PMI, as merger related
discussions are often not public [6] and there could be required special approach how
to involve IS into overall M&A without sharing all information, but sufficient data.
Additionally, if properly managed, IS PMI can significantly improve organizations
competitive state and enable execution of new business strategies. This can be done
through:
• Raising IS competence, IS maintenance efficiency and quality of end-user
support [6]
• Creating synergy through combination of resources [4]
• Improving IS integration into organizational processes, enhancing IS integration
between organizational units [6]
• Introducing new technologies and attracting high-end IT professionals [6]
This area of research also could be investigated more properly in order to come up
with the comprehensive model of so called “side-effect” M&A strategic goals, which
are achievable through IS PMI.
3 Why IS Integration is Difficult
At the same time, IS PMI tends to be complicated and complex process, due to
several reasons:
• There are quite many IS in each of merging organizations [2]
• These IS quite often are old systems, different versions of systems, heavily
customized variations of systems, or several copies of the same system, that
makes the integration much more difficult [2], [3]
• Quite often systems are geographically distributed [3]
• There also quite often is a dependency on external vendors [3].
This list is still high-level types of potential difficulties, which in future research
could be elaborated in more details, as well as accompanied by related risk and
problem management activities, which can be taken from existing best practices
mentioned in generic PMI research:
• Detailed audit of current situation [3]
• Proper planning [3]
• Realistic goals [1]
• Focus on best value for minimum resources [1]
• Keeping organization functional also during transformational process [1]
• Ability to learn and recover from integration mistakes
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Additionally, IS PMI is linked to changes in other areas in merging organizations,
like internal process execution and customer facing services, which requires
management of human factor related risks like emotional traumas, learning
challenges, and expectation mismatch [4], [7]. Some of already mentioned practices
should be turned into more detailed guidelines:
• End user involvement [3]
• Extensive and open communication [1], [3]
• Alignment between stakeholders [5]
One more aspect in IS PMI is related to the fact, that it leads to some unneeded IS
resources, that should be reconfigured or delaminated [4]. Currently, there is a lack of
a proper model for capturing such resources, as well as defining required
reconfiguration activities, so that in the end new resource structure operates in the
most efficient way.
4 IS PMI Research Perspectives
There is as well a tendency, that current research takes the perspective of one of the
following stakeholders – acquire organization, target organization or future
organization. However, there are more participants involved in the PMI process – like
sellers and consultancies, and their perspective should be taken into account. [5]
Also, major part of existing research is focused on the production industry case
studies, which have own specifics. With growing amount of mergers in IT sector,
current PMI models should be reviewed and adopted to the IT specifics [3]. But
before that, IT specifics impacting PMI process, should be identified and described.
5 IS PMI, IS Architecture and IT Strategy
IS Architecture could be useful for linking together enterprise architecture and
specific IT systems. As IS architecture usually serves as an intermediate level
between organizational processes and IT systems supporting these processes, it is
important and valuable step in combining PMI of enterprise business models and
related IT systems. [8], [11]
IS Architecture also helps to plan in details IS integration, as it covers all three
aspects – information architecture, application architecture and technological
infrastructure. [10]
With looking on IS PMI through IS Architecture perspective, it makes sense to go
even further and integrate PMI into IT Strategy. IT strategy helps us focus on final
goals for PMI and link all planned activities to them yet again. [9], [10]
Integrating IS architecture and IT strategy into PMI would mean to execute the
following activities:
• Create for all merging enterprises IS Architectures, clearly stating which
business goals and processes are supported by IS from information, application
and technology perspective
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• Create merged enterprise IS Architecture, based on the enterprise architecture
for new enterprise
• Define IT Strategy to implement IS Architecture created on the previous step
6 Conclusions
In the current PMI and IS PMI research there is a place for SCPS perspective, which
would combine both streams together. SCPS PMI research could become
comprehensive methodology, covering all three dimensions of integrated
organizations – socio, cyber and physical:
• M&A strategic goals and linked PMI goals, with clearly defined measurable
success criteria
• Impacting contextual factors and related decisions about PMI strategy
• Selected PMI strategy with identified integration scope and approach
• PMI process framework and best practices
This methodology would include different stakeholder perspectives, as well as
would take into account different industries specifics. This methodology potentially
could reuse and incorporate some of existing IS Architecture and IT Strategy
approaches.
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