Data issues hamper M&A integration

A new survey released today into the attitudes of the top IT decision makers in the UK has found a worrying majority feel mergers and acquisition (M&A) activity ignores the implications of IT integration, with potentially worrying compliance implications.

Prompted by the recent findings of the Boston Consulting Group, the research looked to identify what underlying IT issues could contribute to failing mergers and acquisitions and found more than a third of those surveyed did not expect to complete IT integration with a merged or acquired company within two years.

This lack of ability to integrate new organisations in a timely fashion puts the Boston research into perspective, which looked into the effects of M&As within the US, Europe and Asia Pacific regions and found over half (58.3 per cent) of all such activity between 1992 and 2006 not only failed, but actually reduced shareholder value.

Today's research, carried out by analyst firm Bloor Research, polled 56 members of the National Computing Centre (NCC) - whose entire membership accounts for 80 per cent of UK IT spend - and found 54 per cent cited poor systems documentation, a lack of metadata, diverse and uncontrolled data sources and poor data quality were all significant problems that hampered M&A IT plans executed in the last five years.

And, despite the fact that 50 per cent of the chief information officers (CIOs) questioned said they knew about the planned M&A "months before" it happened, 37.5 per cent said that a detailed plan for system integration wasn't put in place until "months after."

One NCC respondent commented: "IT involvement was not high enough and we have still not completed the integration process," while another stated: "The impact of IT is a vital element to consider but it may not be a critical parameter in all acquisitions."

The survey sponsor, data warehousing vendor Informatica, said the findings were particularly alarming when seen in relief to the set of European Union (EU) directives, which correspond to the US Sarbanes-Oxley (SOX) Act.

EuroSox, as they have been dubbed, will require a newly merged entity to disclose consolidated financial information within three months of joining forces when they become law next year. Yet, 50 per cent of NCC members surveyed said no integration had been achieved within this time.

John Poulter, Informatica senior vice president for Europe, Middle East and Africa (EMEA) region told IT PRO: "Too many organisations are attracted by the potential savings and efficiencies of M&As, but not enough bring IT in early enough to ensure it goes smoothly and produces accretive shareholder and customer value."

And, in addition to the new compliance pressures of EuroSox, he said the value of involving IT early and ensuring it has the necessary tools to integrate data effectively would "also help get a better value deal for the merged or acquired company."

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