Business

mergers and acquisitions

75% of Mergers and Acquisitions Fail Due to Unsuccessful Software System Integration

Many organisations do not comprehend the potential software implications when buying or selling an organisation. IT infrastructures pose a huge challenge during mergers and acquisitions, especially when merged organisations are of a similar size.

It is common that the two combined organisations will have diverse, contrasting software software systems. Therefore, the software applications will not be able to integrate and work together. In order to gain the expected benefits and bottom line profits from a merger, the new organisation has to rationalise its technical architecture, whilst standardising and incorporating systems in order to ensure that the software can support the growth of the business, ensuring productivity will not decrease.

Securing Information for Mergers And Acquistions

 

A recent survey illustrates that 75% of failed mergers and acquisitions were due to a failure to meet requirements of IT and software. Whilst the due-diligence process may have been robust in most other operational aspects, software is often an area overlooked. Securing information before a purchase or an merger is key, as a minimum organisations should consider:

  • What software licenses does the company have and how critical are they to the company’s core business?
  • Has the company historically incorporated open source software into its applications, and if so does the company have any open source software issues?
  • What software is critical to the company’s operations, and does the company have appropriate licenses for the IP of that software.
  • Does the company’s usage of that software comply with use limitations or other restrictions?
  • Requesting architectural documentation for the system structure and applications
  • Identify who wrote the original base software and undertake a full code review/systems audit

Software assets continue to become an increasing part of a companies valuation, buyers should understand the technical debt embedded within the code that they are acquiring. Prior to acquiring a company, insist on conducting a technical debt assessment as part of the due diligence process, as in some cases, a buyer may discover that the two organisations systems are so incompatible, that it may be too costly to consolidate them. In these situations, its important to take a longer view by allowing both companies to continue to function with their existing systems, whilst developing a bespoke specification that meets the needs of the new organisation.