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Mergers & Acquisitions

17 Feb 2009

IT Strategy Makes the Most of Unanticipated Organizational Change

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Change is coming at you from every direction, and it's coming fast. The uncertainty of capital markets and dramatic economic events of the last year mean that your business strategy and decisions are being influenced by forces beyond your control. You're making necessary adjustments. You're changing tactics. You're looking at unique opportunities. And words like mergers, consolidations, acquisitions and divestitures are a more common part of the conversation as you plan for your company's future.

Though often tinged by uncertainty, it's not a bad conversation to have. Mergers and acquisitions (M&A) can help organizations achieve greater operational and financial scale so that they may compete more successfully in the marketplace. A positive M&A event can produce synergies and cost savings that deliver tangible benefits in the form of earnings growth and improved cash flow.

From an IT perspective, M&A activities can eliminate redundancies and achieve rationalization, scale efficiencies and other savings. With proper preparation, merging organizations may extract significant value from their combined operations.

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Complexity

Reliability

Few organizations, however, are properly positioned to capitalize on the opportunities presented by M&A activities, especially when those activities are accelerated by economic necessity. More than half of mergers fail to achieve their promised outcome or generate business value, according to published research.

"You've got to be nimble and agile to effectively acquire and integrate companies and competitors without disrupting your business and affecting customers," says Chris Moyer, an EDS Fellow and Chief Technology Officer for Europe, the Middle East and Africa (EMEA) at EDS, an HP company. "And when a merger is unexpected or hastened by market conditions, it's that much more difficult to quickly convert resources, streamline operations and implement rapid modernization."

Technology strategy can make or break the integration, Moyer adds. Companies are at a significant competitive disadvantage when they have a dependence on rigid core legacy systems with redundant applications and fragmented data stores across disparate organizational silos. They simply don't have flexibility needed to increase scale. And the combination of multiple processes and systems can send costs spiraling out of control, negating potential savings created by the M&A event.

Further, complex M&A activities require the ability to plan and execute a massive logistical transition, to foresee and mitigate risks and to launch and complete the project in the shortest possible time frame. This all must be accomplished while avoiding costly disruptions to the core business and protecting customer satisfaction.

"Companies facing a merger, acquisition or other organizational challenge need a trusted ally with deep knowledge, detailed planning and proven processes for bringing these changes to successful fruition," says Moyer. "You need a partner that can help you with unifying and maximizing disparate IT elements – including applications, infrastructure and business processes – to form a cohesive system for moving the combined enterprise forward."

With more than 45 years of experience, Moyer adds, EDS brings to bear an unrivaled integration skill set along with unparalleled breadth and depth of knowledge. EDS combines strong technological competence with industry and business process expertise to help our clients quickly and efficiently achieve their M&A objectives.

The EDS process starts with helping our clients establish a firm foundation for building their new, consolidated enterprise. Merging entities require a scalable, service-based architecture that can accommodate increased transaction and data volumes and adopt new business models and processes seamlessly. New scalable platforms allow companies to process increasing volumes, while addressing continued margin pressures for existing products and the increasing demands of customers and regulators. A flexible organizational model that embraces change and makes the best use of human capital – both inside and outside the company – is also required. Finally, robust and highly efficient operating processes are needed to process increasing volumes.

EDS also empowers clients to make the most of their M&A opportunities by providing:

  • Well-defined, proven methodologies tailored to the clients' industry and unique integration needs
  • Architectural capabilities to minimize the risk and impact of consolidation
  • The most skilled professionals with integration-specific expertise and capabilities
  • A proven understanding of the trends and issues influencing the clients' business and industry
  • Deep knowledge of the clients' legacy systems, applications and business processes and the ability to expertly combine them
  • Established relationships with multiple technology partners, bringing the combined resources of the IT industry's greatest companies to bear on the clients' M&A challenges

"The bottom line is that proven transitional methodologies can be invaluable in M&A activities," says Moyer. "They help bolster employee morale, minimize disruption to customers and speed the merged organization's ability to respond quickly to changes in the marketplace. EDS' globally consistent processes and proven tactics bring speed and agility to the M&A process, providing quick reaction and immediate results."

In a changing marketplace where 'business as usual' is anything but, organizations will inevitably have to divert from their expected path. They'll be making difficult choices to solve short-term problems. And quite possibly, these enterprises will look at options that include a merger, divestiture, private equity initiative or other structural change. But they'll also factor in their IT strategy and how a technology partner can be an essential component of this complex business solution. It's a measured move that will keep them on the leading edge of the competitive marketplace for years to come.