I was driving to work this week when I heard about Walt Disney Company’s announcement to buy comic book giant Marvel Entertainment (MVL) for US$4 billion. I started thinking about what it would be like to see the X-MEN hanging out with Snow White’s Seven Dwarfs the next time I take my kids to Disneyland. At the same time, I was wondering if an increase mergers and acquisitions were a sign of an economic recovery?
My curiosities lead me to do some research online on Mergers Unleashed a premier online site for M&A news. I discovered a number of new announcements including:
- Oil driller Baker Hughes (BHI) agreed to buy competitor BJ Services (BJS) in a $5.5 billion deal.
- General Electric announced that it’s selling off its security business unit for $2 billion for regulatory reasons.
- Warner Chilcott (WCRX) agreed to buy Procter & Gamble’s (PG) pharmaceutical business for more than $3 billion
As organizations merge, acquire, or shed parts of their business due to poor performance or other reasons, a number of key business priorities arise that require IT efforts to ensure success. These may include:
- Ensuring ongoing regulatory compliance by consolidating financial reporting systems and databases
- Combining sales teams and operations by integrating sales management applications and CRM systems
- Retaining customer relationships by integrating customer facing applications with real-time data
- Up selling and cross selling by consolidating and rationalizing customer information for sales and marketing purposes
- Improving operational efficiencies by consolidating supply chain management applications and vendor networks
When companies merge, it’s usually the case that the systems and applications on each side are not always compatible, the required data is in different formats with different definitions, data quality is seriously questionable, and data on system that are no longer necessary needs to be archived. Having the right data integration, data quality, and information lifecycle management solutions to access, cleanse, transform, deliver and eventually archive accurate, timely, and comprehensive data for data migration, application to application data synchronization, data consolidation, and single view of customer initiatives is not only smart but essential for success. These are complex projects and can take a significant amount of work and planning. There is allot at stake for both business and IT and attempting to cut corners by hand coding key data integration requirements is a recipe for disaster. Research has shown that 47% of all M&A’s fail due to poor integration.
In addition to the tools, a merger or acquisition event is a perfect opportunity for data governance. Having a well defined data governance framework consisting of people (data stewards, data owners), policies, processes, definitions, and standards for how data assets should created, managed, and used in the new enterprise is as important as the tools. Organizations that have not been able to justify investing into data governance should use this event as an opportunity to build a strong business case for data governance.
Therefore, does an increase in M&A activity signal an economic recovery? Experts like Howard Lanser, an investment banker at Robert W. Baird are saying, “The Marvel and BJ Services deals show that activity is now broadening to other areas of the economy. Expect that to continue, as long as the economy does not dip back into recession.” Lanser expects many M&A transactions now in process to be announced eventually, perhaps later in 2009 and early 2010. So heads up to those in IT and to business sponsors. If things do get better, we should all expect more M&A announcements. This is a great time to evaluate your data integration and governance resources and capabilities.