By Stephan Romeder, General Manager, Magic Software

Merger and acquisition failures are estimated to be between 70-90 percent, with difficulties integrating data as a major roadblock to achieving improved efficiencies. When managed properly, information technology plays a vital role in creating a smooth transition. But, post-merger integrations can be tricky because of all the complexities trying to pass data seamlessly between the two companies.

Here are six dealbreakers.

1. Mismatched Strategy – The integration strategy needs to take into account the different business models of both companies and the relative strengths of their respective IT departments. For example, in a loosely coupled merger, IT systems and organizations can undergo only minimal integration. If the merging entities are significantly different in size, standardizing around the larger company’s IT infrastructure can work best, with the acquired company’s data being brought over to the new system. When the two merged companies have different business models, a best-of-breed solution can be selected from the available IT portfolios.  In all cases, you need to take a full inventory of all the systems’ applications and how they are used, before drawing any conclusions. Without a full assessment of each IT department’s capabilities, and how closely integrated the systems need to be, the resulting solution can fail to meet business requirements of the new combined entity.
2. Breaking Data Privacy Promises –According to the Federal Trade Commission, all of the commitments that were made by an acquired company regarding how it collects, uses, discloses, transmits, stores, shares and destroys personal information need to be kept.  When Facebook acquired WhatsApp, the Federal Trade Commission stated that “WhatsApp has made a number of promises… that exceed the protections currently promised to Facebook users. We want to make clear that, regardless of the acquisition,WhatsApp must continue to honor these promises to consumers.” Before deciding on a combined IT infrastructure, the acquiring company needs to do full diligence on the necessity of maintaining more stringent data protection.

3. Failing to Meet Regulations – It’s important to take into account any regulations regarding data management that are specific to an industry or a geography. This is especially true if the new company will operate in a new region or a highly regulated sector, such as healthcare, financial or business sectors targeting children as consumers. All laws and regulations, both domestic and international, existing and future, regarding disclosures about the collection of consumer information need to be addressed, for example PCI DSS,HIPAA,GPDR, ISO/IEC 27001, COBIT, etc.
4. Incompatible Supplier Data –One of the clear goals of mergers and acquisitions is to lower costs through eliminating overlaps. However, nothing kills the thrill of an acquisition faster than finding out you can’t integrate systems to achieve the synergies you expected. One quick win is achieving greater purchasing power with suppliers.  But incompatible data types can prevent combined orders. A switch manufacturer and the company it acquired bought thousands of electrical components each month but because they weren’t able to integrate the supplier data they were unable to realize the economies of scale they planned.

5. Losing Sight of Short Term –The goal on day one is to minimize any disruptions to normal business operations. The implementation plan should focus on immediate IT requirements servicing customers and completing transactions as a separate initiative from a deeper analysis of the merger plan. This phase provides an opportunity to take stock of each merging entity’s current IT systems and organizations and setting the baselines that will form the foundation for a future system while ensuring that operations are smooth with the least amount of interruptions.

6. Brain Drain – Data integrations rely on an in-depth knowledge of systems and their data. But typically after an acquisition, important in-house knowledge is lost. IT employees can retire, be found redundant, or leave on their own volition without sharing critical knowledge. Information about legacy systems can be lost forever. Out-sourced consultants that designed and implemented systems can fade away without a trace. The new company will have difficulties defining a strategy if they don’t know the system’s history.

Mergers are not easy, and neither is data integration. You can avoid some of the most common data integration disasters by understanding the challenges of entering new markets, and evaluating the relative strengths and expertise of all IT personnel. In addition to managing short term requirements, having a project plan that analyses the risk and complexities of new regulations, privacy requirements, and regions is the best way to prevent post-merger data integration disasters.