Informatica Perspectives

I was reading a report the other day about the fact that most M&A activity fails to deliver shareholder value.  Apparently 79% of M&A activity ignores IT integration and this then undermines the success of M&A through poor planning and execution of the IT integration process post-merger or post-acquisition.  The piece entitled "Mergers and Acquisitions and their IT impact" comes from UK-based analyst firm Bloor Research.

It had me wondering "why?"

Interestingly enough most M&A activity does not naturally involve the IT organization.  OK, I get this - after all it is usually the CEOs who get together, agree on the merger and then go to their boards for approval.  After that functional teams start working and progress is made.  There’s an interesting observation made by the report’s author, Phillip Howard:

“The overwhelming impression that one gets from studying these results and from reading the comments provided by respondents, is one of CIOs and IT managers struggling manfully against huge odds.” 

Why is this?

Firstly, it’s because combining IT functions is complicated.  Here is just some of what one needs to do: 

• Merge the general ledgers for regulatory requirements within a defined timescale - by consolidating data from disparate systems and ensuring the resulting data can be trusted.
• Pull together customer service functions - by consolidating data from disparate systems and ensuring the resulting data can be trusted.  
• Determine which applications should be kept, and which should be retired - and then consolidating data between the various applications and ensuring the resulting data can be trusted.
• Ensure a single view of your product information - by consolidating data into a single combined system and ensuring the resulting data can be trusted. 
• Align outsourced functions - by consolidating data to the chosen services and ensuring the resulting data can be trusted.

The list goes on, and it’s clear that the amalgamation of IT functions is a major obstacle to the successful completion of a merger or acquisition.  I would even go so far as to say that the success aspired to by the CEO is significantly dependent upon the ability of IT to bring together the systems necessary to drive the new organization forward. 

Data integration and data quality are critical components of ensuring success in this process.  Just yesterday we announced an example of this with one of our customers, Brazilian telecoms giant, "Oi": 

Oi, however, is a study in complexity. At the turn of the century, Brazil privatized its telecommunications companies. Sixteen companies, operating as monopolies in sixteen Brazilian states, merged to form Telemar. In 2002 Telemar launched Oi as their mobile branch with independent operations. Three years later, Oi merged operations with Telemar, and Oi emerged as a full service telecommunications company.

Oi’s challenge: How do you make a highly complex structure look simple to the users of your data and, most importantly, to your customers?

At this year’s Informatica World we showcased another one of our customers who turned to Informatica to help with their M&A processes.  That time it was Virgin Media and we acknowledged all the work they’ve done in this area with one of our 2008 innovation awards: 

"There's only one way to compete effectively in the communications/entertainment industry - customer service, outrageously fine customer service, supported by real-time access to customer data every second of every day. And that data has to be up to date. In spite of the merger of three companies over a brief period, that's what we promise our customers. This nomination acknowledges how much what we've accomplished means for Virgin Media and how much it means for our customers."

– Paul Froggatt, Information Management Manager, Virgin Media

Data integration is a critical enabler to successful M&A.  Without it failure is far more probable - with it at least organizations have a chance of delivering shareholder value.

Have you gone through M&A recently? I'd be interested in your views on the role data integration plays in helping corporations achieve success in M&A activity.