Synergy management in M&A projects : the significance of information technology (IT) for value creation

Abstract

This master thesis discusses the significance of IT in the M&A process for value creation. Value creation through IT is achieved by conducting professional IT synergy management. IT synergy management comprises all activities related to identification, qualification, quantification and realization of synergies stemming from information technology. Appropriate cost and revenue synergies have to be identified and leveraged, and potential dyssynergies avoided. The relevance of appropriate IT synergy management is given in all M&A process phases, in order to support value creation. Main focus points for achieving value creation are adequate IT due diligence and adequate IT integration planning and execution. As organizations become increasingly dependent on IT to improve business performance, they must expand the scope of their M&A due diligence to include an IT analysis, grounded in solid principles covering IT's importance to the deal creation logic, IT risks and opportunities, and IT's bearing on overall commercial due diligence.127 Market research also indicates that post M&A companies typically spend up to 30% of their IT budgets to address system integration issues.128 Therefore, the challenge is to integrate different technologies and systems, while protecting investments. To enable this with reduced time and cost parameters, it is critical for M&A processes to have a well-defined IT integration approach. The related components are described in this thesis along with the practical execution in a case study. When synergy management is mastered professionally, IT creates value for M&A transactions in three ways: 129 * Improved operations from consolidation or automation, * Improved revenue streams from new IT-enabled capabilities and * Better IT effectiveness. The IT value creation opportunity should be realized in professional M&A activities. The key to success is simple: Understanding the significance of IT for value creation and consequently managing IT synergy potentials right.