It feels like someone has fired a starting gun for the merger
and acquisition (M&A) market. After months of relatively low
activity, September saw proposed multibillion-pound deals between
major companies such as Kraft and Cadbury as well as T-Mobile and
Orange in the UK, writes John Poulter, senior vice-president EMEA
atInformatica.
These aren't motivated by financial woes, but by a desire to
create a competitive and compelling market proposition. Of course
efficiencies will be realised - Orange and T-Mobile hope that the
integration will generate synergies with a net value of around
£3.5bn, which is of course attractive. But a word to the wise -
according to the Boston Consulting Group more than 50% of M&A
deals fail to deliver their expected value.
Overall, most deals are tasked to start generating tangible
value within twelve to eighteen months. Meeting such aggressive
timescales is a tall order requiring detailed and comprehensive
risk management and mitigation. Technology is a critical success
factor in making a merger work with the IT department having to
reconcile the multiple systems that each company brings to the
table. In the heat of the moment, one element that often gets
forgotten is data. Terabytes of data. Hundreds and thousands of
data sources. Data in arcane, difficult-to-access formats. Data in
spreadsheets. Dirty data. Data that can't be found. Data that no
one really understands or can explain. Data that runs a
business.
We live in a world where information is the currency of
businesses - at any level - yet often it's not even given a cursory
thought or considered central to M&A success. At the heart of
the issue is the fact that assumptions are often made about data,
that turn out to be false. For example, highly accurate data is
needed when in actual fact it is poor quality and missing vital
information. Alternatively data will be in specific formats, when
in fact it is unknown or multiple types.
If you're Orange or T-Mobile, for example, this poses a serious
threat to the viability and success of your merger. After all,
retaining customers is your revenue source and missing valuable
data means that you aren't in a position to spot account
development opportunities or trends to make your customer outreach
more tailored. A lack of accurate data leaves serious holes in your
ability to process customer queries or complaints.
From an operational standpoint, there are also ramifications. By
sidelining data companies risk losing customers, violating
reporting requirements or finding themselves unable to meet
regulatory demands. M&A is often considered a saviour for
businesses. However, not understanding the requirements of
integrating multiple businesses and their data can swiftly damn
these mergers to failure.
The business world is littered with M&A sob stories; the
last thing anyone wants is to join the club. In order to live up to
the promises made when the merger was announced, the new
organisation needs to hit the ground running. Customers are
extremely unforgiving and any grace period is small. The M&A
market may be showing tentative signs of recovery, but without
proper IT and data planning for the merged entity, companies will
not deliver on their touted benefits.