The global buyout frenzy reached a peak in 2007 when the value of deals topped out at US$4.83 trillion globally, an increase of 27 percent from 2006.
But a 2007 study from Hay Group revealed that over 90 percent of European corporate mergers and acquisitions fall short of their objectives.
Traditional reasons include clashing cultures, mismanagement or a flawed strategy, but IT also takes the blame for failure.
In a recent survey over 75 percent of managers worldwide admitted that they do not always consider the operational impact of applying change to their enterprise applications when making a strategic business decision.
Ton Dobbe, vice president of product marketing at Unit 4 Agresso, a Netherlands-based enterprise resource planning company, believes that this profound lack of attention to what happens post-merger is the root cause of the problem.
"Enterprise applications are a known factor. It is quite possible to investigate during due diligence how much effort application change and systems integration will take," he said.
"Therefore IT systems should never be a valid excuse for a failed merger or acquisition, but they are."
Enterprise applications not adapted in a timely and proper way to the post-merger situation means that the combined organisation typically runs into problems.
These include a lack of information, making it impossible to compare the performance of various business units and generate reliable management information, and a lack of synergies.
Dobbe said that this leads to a lot of extra work, as well as the possibility of fraud and creative book-keeping because proper governance controls are missing.
"The expected benefits of a merger - shareholder value and economic scale - are often lost due to inadequate post-merger adaptation of enterprise applications," he said.
"Legacy ERP systems in particular are very difficult and costly to change. It is typically companies in rapid change mode that suffer from this.
"Such companies should seriously consider migrating to alternative solutions that embrace post-implementation agility. The cost of doing nothing will easily exceed the cost of such a switch."
Software integration holding back corporate mergers
By Clement James on Jun 13, 2008 8:00AM
Mergers and acquisitions are failing to meet projected benefits because enterprise application software is increasingly expensive to change and support, according to new research..
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