He was quite literally the toast of last year’s EEI Finance conference. Using his bank’s diverse resources (Rothschild vineyards in France), he arranged an unforgettable wine tasting that was a...
Before the Utility Merger: Thinking Through IT Integration
The way senior tech executives and business managers define success has changed.
in optimism comes from a moving definition of M&A success. Tactics which used to provide differentiating value ( e.g., target selection) have become commoditized. Bellwether acquirers have turned to other, increasingly fine-grained methods of extracting value in their M&A transactions, often focused on post-merger integration. Previously, for example, the standard for IT involvement in merger planning was “before close.” Now the standard is “before announcement.” We consistently find that, with notable exceptions (usually in high performing industries), IT and business executives have different worldviews. Why wouldn’t these different worldviews apply to definitions and means of “value creation”? Alignment is difficult to uncommon, and is hard to achieve.
The Business Case for IT Alignment
Other research we have conducted into IT and business productivity—regionally focused on the United Kingdom/Ireland, the Nordic region, and the Americas—continues to verify the importance of strong IT-business alignment. Companies that are “strongly aligned” reported overall productivity improvement rates 38 percent to 44 percent higher than those that are “weakly aligned”; IT productivity-improvement rates were similarly 33 percent to 38 percent higher. And IT delivered 34 percent to 38 percent more value in the strongly aligned companies than in weakly aligned companies.
At the end of the day, IT and business executives agree on the value of involving IT as early as possibly in M&A transactions (see Figure 4) . Once involved, both IT and business executives have opportunities to create great-er value in these transactions by recognizing the value of integrating cultures in the immediate post-merger period, and by working to ensure the strongest possible alignment of the IT and business functions as a steady-state reality. Winning those battles positions the post-merger company for better business performance and as a stronger competitor.
1. Accenture, “Keys to the Kingdom: How an Integrated IT Capability Can Increase Your Odds of M&A Success,” 2002.