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Integrating Management Information Systems Following
Organizational Mergers or Acquisitions
Work in process
Fred Niederman, Saint Louis University
[email protected]
Elizabeth Baker, Virginia Military Institute
Abstract
Mergers and acquisitions have become a normal business occurrence for companies
large and small. Integration of entities following mergers and acquisitions are often
more painful and less successful than they could be. The integration of information
technology functions plays a vital role in the ultimate results of such a merger by
actualizing product and customer synergies, establishing best practices drawing from
the best of each organization, and providing smooth transition to integrated reporting
and decision systems. This study proposes to investigate best practice for information
technology leaders for both large scale mergers and more routine smaller acquisitions
considering technology portfolios, intellectual property, data assets, personnel, culture,
and other key issues in such integration. Deliverables will include development of
grounded theory suggesting patterns of activities that lead to more successful merger
and acquisition outcomes. From a practitioner perspective, such theory will be
presented in the format of a taxonomy of critical success factors forming a
comprehensive "checklist" of issues for CIO consideration in approaching future
integrations.
The authors are grateful for the funding provided by the Lattanze Center @ Loyola
College in support of this research.
Please do not quote or reference without explicit permission from the authors.
“Studies and experiences have shown that a major reason why many
mergers and acquisitions fail is because of problems that occur during the
implementation stage of the transaction. Information technology (IT) has
emerged as one of the most critical aspects of integration and successful
implementation.” (Popovich, 2001)
“When dealmakers are trying to knit together a transaction, managing all
the details can seem like death by a thousand cuts. But experts insist that
deal principals must look beyond financial and other models when
evaluating deals and include information technology (IT) on their short list
of concerns.” (Shearer, 2004)
Introduction
Merger and acquisition activity is extensively found and of extraordinary
consequence in the business world. Based on statistics published in IDD Magazine
derived from the consulting group 451 which maintains a database regarding merger
and acquisition events, some 4000 mergers and acquisitions were reported in the
technology and telecom space in just the year 2006 (Miller, 2007). However, on
average, when adjusted for market effects, the value of both the acquired and the
acquiring companies tend to fall rather than increase as a result of merger and
acquisition. They frequently result in a loss of value sometimes ending in divestiture.
McKiernan and Merali (1995) report that estimates of the proportion of such divestitures
range between 33% and 60%. They reference Violano (1990) claiming that 80% of
merger deals ended up, “destroying the value of the organization for the acquiring
company.” This is of importance in the MIS world because a major reason for poor
results from mergers and acquisitions is the difficulty and complexity of integration of the
entities (Srivastava, 1986) and, as noted in the quotations at the top of this paper,
information technology and the MIS functions play a crucial role in effective integration.
The management of mergers and acquisitions at the operational level should be
of great interest to CIOs and senior MIS managers. It should be no surprise to be called
upon multiple times in an active career to evaluate an acquisition or merger opportunity
prior to one taking effect. Even more likely the CIO will be called upon to lead the
integration of MIS departments following a merger or acquisition. Although other
factors, such as the negotiated price of the transaction and merging of cultures and
business processes are also important in the outcome of a merger or acquisition event;
the integration of MIS assets are also important influences on outcomes from the
transaction. This is so for several reasons not least of which are: (1) the newly merged
entity may take advantage of increased bargaining power to renegotiate with vendors
and other suppliers in a way that significantly reduces cost or increases services (or
may miss such an opportunity: (2) the MIS function provides critical support for business
processes whether they be in operations, marketing, research and development, or
elsewhere the integration of which relies on smooth uniting of MIS infrastructure and
technical support; (3) the MIS function provides the continued supply of accurate,
timely, and relevant operational data formatted, aggregated, cleansed, and presented
for on-going business decision making; and (4) the MIS personnel in an organization
represent a substantial knowledge asset for maintaining existing technology, providing
innovation, and moving to a stronger platform in the emerging new business entity
formed of acquired and acquiring firms.
From an idealistic point of view, the goals of MIS professionals in a merger and
acquisition will include preserving and expanding value to the organization and,
ultimately, society. From a pragmatic perspective, mechanisms for achieving these
goals are not necessarily clear. A scarcity of research on the role of MIS in merger and
acquisition events provides little guidance in this area for practitioners. This study
proposes to examine in detail issues involved in the phases of merger and acquisition
from pre-event discussions to finalizing consolidations; to identify critical factors,
actions, and policies, and to map patterns of relationships between factors, actions,
policies, and the outcomes of merger and acquisition events.
Background on Mergers and Acquisitions
Two extensive research literatures have developed regarding mergers and
acquisitions. In broad terms, the first is financially-oriented looking for structural factors
that correlated with rising or falling value as measured by stock prices. Such
investigation will consider, for example, the degree of similarity in product lines,
marketing skills, or other factors and correlate such measures with stock prices at
various points in the future. Alexandridis, Antoniou, and Petmesas (2007) show that an
optimistic view in approaching mergers and acquisitions is largely unsupported by
observation of prior financial results when reviewed from a variety of methodological
and conceptual perspectives. Pautler (2002) takes an economic approach from the
perspective of investigating whether or not mergers and acquisition create dangerous
anti-competitive trust activity. This study considers only the net impact of mergers and
acquisitions on the overall economy and is not much concerned with issues that would
increase or decrease the probability of any particular merger being successful.
A second literature attempts to investigate in more detail the dynamics by which
some mergers prove more successful than others. The underlying premise is that
quality of management of the merger process influences the outcome. Even where
structural factors are extremely favorable, poor management can “blow” the integration
of the two firms whereas even where structural factors are unfavorable, excellent
management might transform the situation into a success. Over a large number of
mergers, such management characteristics may prove to simply average out and be
viewed as part of a natural “error” term in regression equations. However, from the
perspective of any given merger, management quality and effectiveness of integration
may account for significant variation in outcome. Moreover, if standard approaches to
effective management of such change are discovered and diffused to become norms
the percentage of successful mergers may be increased.
The overall nature of a merger can be described as two sets of competencies
and assets moving through a series of transitions from pre-deal assessment through
being legally combined into a single new entity and through a set of additional
transitions that restructure an emergent new entity from two separate components. In
an abstract sense, this can be viewed as a series of moves through a problem space
from a “current state” characterized by the un-integrated set of assets brought by each
of the new partners to a “future state” characterized by a new set of assets representing
a single combined entity. Clearly some of the original assets may remain unchanged,
others may disappear, and still others will be recombined in various ways into new asset
packages. While this describes the general pattern of mergers and acquisitions, much
variance can be found in the original goals motivating the merger and in the amount of
integration to be found in the new emergent entity.
Differences on this dimension of integration can be viewed as a continuum from
low to high levels of intended integration. At one extreme, the acquired entity is left very
much as a stand alone and independent component. This alternative can be described
by an ownership holding company with little interaction among components. At the
other end of the continuum, mergers may seek to fully integrate business processes,
product lines, staffing assets, and physical plants into a single new combination.
Naturally, in practice, particular mergers may take intermediate positions representing
integration of some but not all business components. For example, IT systems and
information may be combined but marketing or manufacturing may be left distinct.
Where lower integration is sought, the firm is likely to be minimizing short term
integration costs. It may be able to reinvest profits from one organization into the capital
needed for investment and expansion in another product. Over time, however, with
enough acquisitions, some costs may appear. For example, a firm with many acquired
parts may find itself with many duplicative personnel, supply acquisition, warehouse,
and other assets. It may, in fact, be more costly to integrate such replicated assets at a
later date when the initial unfreezing phase of the change cycle associated with the
merger announcement has passed. On the other hand, with a goal of higher levels of
integration, the new entity has many challenges involved in the integration. Such
challenges involve the quantity and timing of changes. Issues tend to be interrelated
and involve personnel (retaining key personnel, making sure that the needed skills are
allocated to the right tasks), culture (moving toward common decision making and
conflict resolution approaches), and communication (conveying transitional messages
quickly but also accurately). Greater efforts to substantially integrate at operating levels
will, in the short run, engender more cost and more risk, but will also afford the potential
for positioning for significant long-term benefit through creating synergies and reducing
duplications.
In general firms are faced with the M&A management paradox. Paruchuri,
Merkar, and Hambrick (2006) describe this as “one of the central dilemmas in managing
acquisitions.…” Because firm experiences costs and risks in aggressively pursuing
integration immediately, there is a temptation to allow the merging organizations
substantial independence to mitigate these costs and risks. However, in providing such
independence, the opportunity to create synergies, which is often at least part of the
rationale for merging, may be reduced or lost. In the short run, extending the time
period for managing change may allow for targeted use of limited resources, but over
time the accumulation of redundant business processes may be more difficult to
integrate as the organizational “unfreezing” caused by the M&A will have refrozen into
patterns less easily modified.
The mechanics of higher levels of integration would seem to require (somewhat
in this order) (1) an inventory of assets brought to the new entity by the acquiring and
target companies; (2) a strategy for their restructuring; (3) reallocation or combining of
redundant resources; (4) coordination of related but different resources, and (5) creation
of resources for “gap-filling” and exploitation of new opportunities.
This view is consistent with a phased perspective where activities in each phase
of integration are potentially important. At least five distinct time periods have been
recognized. First, there is a pre-merger period where each firm consists of a distinct set
of competencies and assets. Second is a negotiating period where terms for merger
are considered, where at least one side investigates the assets of the other and
estimates the potential for increased value through integration. McKiernan and Merali
(1995) suggest that as a result of various pressures, line managers eventually to be
responsible for implementation are generally not included in these first phases. They
suggest that this results in the failure to discover poor organizational fit at an operational
level. Third is the period of announcement and approval seeking from stakeholders
including shareholders and government regulators. Fourth is the early implementation
including planning and building relationships. Fifth is the longer term implementation
where new arrangements are to be exploited. These phases are referred to directly and
indirectly in the literature but without analysis of the unique dynamics that differentiate
each stage.
A subset of the literature focuses on staffing. Much of this literature is about the
attitudes of employees after a merger and techniques for improving the probability of
achieving desired results regarding employee attitudes. For example, appropriate
levels of helpful communication as well as high quality human resource practices are
advocated to bolster morale (Nikandrou, Papalexandris, and Bourantas, 2000). This
literature doesn’t appear to address a number of related issues including how different
sets of job levels might be recombine; how differently organized sets of job descriptions
might be reorganized; how future staffing needs are determined and how existing staff
are evaluated for fit with future positions. There does not appear to be any literature on
how to look for complementary skills for new team building or expanding implicit human
knowledge capabilities. All of these issues would be relevant to a discussion of the
merger of IT capabilities within the overall process of both human resource and
technology integration.
Another subset of the literature deals with the influence of variations in culture
between the initial organizations. In principle, companies with cultures that are more
alike should be easier to integrate, but complementary cultures may provide more
opportunity to extend the range and power of the initial entities into a stronger emergent
entity. Teerikangas and Very (2006) review literature showing mixed outcomes based
on similar or different initial entity cultures. They consider both organizational and
national culture and conclude that difficulties in grasping the multi-level nature of
culture, the complex dynamics of the merger and acquisition process, and
measurement issues contribute to the diverse results. Their conclusion calls for close
examination of the underlying complex dynamics of mergers and acquisitions in the field
as a base for observing stable relationships and presenting emergent theory in this
area. In essence, they point out the difficulties of predicting outcomes from an initial set
of variables without considering the mediating effects of managerial actions and the
“micro results” and feedback loops that derive from these.
Although some inferences can be made from overviews of integration in merger
and effects of merger on staff attitudes, no similar subset of literature focuses on the
role of MIS in the integration of organizations following merger nor on the effects of
merger on the MIS function. This is in spite of an acknowledgement of the potentially
critical role played by management of technology (James, 2002, p. 301).
The Role of Information Systems
There are two distinct facets of the role of the MIS function in the merger. These
roles pertain first to MIS as a service provider to other organizational functions and
second to the structure and assets of the MIS function as a division or department.
Increasingly organizations are integrating MIS capabilities with business processes.
The sequencing of activities, the use of information to support these, and the technology
enabling them are becoming increasingly intertwined. Prior to the integration of merged
or acquired firms, many high level business processes, with integrated information and
technology elements, are loosely duplicated between the independent entities. For
example, both entities are likely to have marketing, accounting, human resource, and
production functions. It is equally likely that under the surface the business processes
enacted by each entity differ from one another. In some cases these differences may
be marginal, in other cases substantial. Within the same merger activity, the various
business processes may range in their similarity or difference between organizations.
As noted earlier, some organizations may allow the continuation of separate business
processes while others may aim to integrate these rapidly into single new ones. It is
likely that organizations will aim to integrate some rapidly and others more slowly within
the overall portfolio.
Strategies for such integration at the level of individual business processes may
take a number of forms. Such forms include: (1) eliminating one approach and
expanding the other for use by both former entities; (2) picking and choosing stronger
elements from each approach (e.g. using the prospect approach from one marketing
organization and the sales approach from another); or (3) defining a more optimal future
approach and evolving both individual entities processes toward that new system (e.g.
replacing different sales systems with a new more comprehensive CRM). Note that in
the spirit of fractals which replicate at various systems levels such an approach can be
mirrored at the business process level and at the overall departmental level.
It stands to reason that a variety of capabilities will allow firms during an
integration activity to perform this task more effectively. Such capabilities can be
expected to include: (1) the ability to quickly analyze and understand existing business
processes and how they are interconnected with information and technology
capabilities; (2) the ability to select a strong approach at business process and
departmental level toward achieving integration; and (3) the ability to dismantle older
systems and implement new ones including approaches to expanding technology
capabilities, testing, change management, and personnel training – both IT specialists
and end-users. It is interesting to ponder whether theories regarding absorptive
capacity, essentially state conditions that facilitate or retard the absorption of
innovations, would be applicable in terms of the task of business process, information,
and technology integration.
The second perspective for considering MIS in the merger integration process
pertains to the MIS delivery units as entities unto themselves. It is estimated that 2040% of MIS activity pertains to new projects and development, the rest to “keeping
things running”. The importance of integration of MIS itself is emphasized by McKiernan
and Merali (1995) who suggest that much of the failure of merger and acquisition
integration results from poor management of information systems in the integration
process. Issues include “definition of the new corporate information systems (IS),
infrastructure requirements, the high cost of integration and development of information
technology (IT) systems, and a reluctance to define both IS and IT in the ex-ante stage.
(p. 55)”
As alluded to earlier, the strategies available for integration at the business
process level are mirrored at the department or divisional level. Organizations can (1)
retain a single MIS department and continue providing all service from it; (2) pick and
choose elements from both original entities for combination into a new entity; and (3)
evolve both toward a single new entity, again this is easier to visualize where each
entity is based on legacy capabilities and a new entity is perhaps designed around ERP
or other organization-wide platforms. These alternatives are consistent with those
proposed by Wijnhoven, Spil, Stegwee, and Tjan A Fa, (2006).
Researchers have applied at least three theoretical lens to the examination of
changes in MIS during merger implementation, though, perhaps a number of others
remain unexplored. IT alignment lens (Henderson and Venkatraman, 1993; Hirschheim
and Sabherwal, 2001), the resource-based lens (James, 2002), and attribution theory
lens Vaara (2002) have been used to examine this phenomenon. The IT alignment lens
posits that alignment of four elements will produce better results in IT strategy. These
are the business mission and goals, the business infrastructure and processes; the IT
mission and goals, and the IT infrastructure and processes. Wijnhoven et al (2006)
examine the variables commonly associated this theoretical lens and, based on
empirical evidence from three cases, expand this list of organizational elements that can
vary during merger implementation.
The resource based lens is more general in looking at firms as collections of
assets which, for various reasons are difficult to transfer. In a merger or acquisition a
new combination of assets is created. The role of MIS has not yet been studied in detail
in the literature. Such study would require consideration of MIS as both a set of assets
to be reorganized and as a supporting component of various other organizational
assets.
Another less clearly related view emphasizes attribution theory. Essentially this
theory holds that people attribute success to themselves and failure to external
circumstances. This lens played a large part in the investigation of Vaara (2002)
regarding understandings of success and failure of mergers and acquisitions. This
approach highlights the perception and interpretation of meaning used in evaluating
events rather than in external or “objective” evaluation. For example, in a situation
where a particular plant thrived but the acquiring and target companies both diminished
in value, some representatives of that plant felt that the merger was a success. Clearly
such judgments can be influenced by the position of different stakeholders and variation
in their criteria for success. In seeking an overall measure of success in merger and
acquisition activity, one is tempted to consider overall change in value, however, even
this can change over time as the effect of the merger or acquisition blends with an
increasing number of additional factors.
Some additional prior research pertains specifically to how the MIS functions
ought to be integrated among merging entities. An exemplary case study (Brown,
Clancy, and Scholer, 2003) describes both IT organizations prior to integration, key
decisions at the point of merger, headquarters decisions, applications decisions, and
staffing decisions. It also describes management of the integration over the first 12
months focusing on internal project management, data center relocation, and equipment
movement. Finally, it describes the next 10 months implementing an advanced call
center routing system and migrating to PeopleSoft financials. The study presents 14
lessons of which some are likely to be robust across situations and others idiosyncratic
to this particular case. Practitioner literature on this topic presents a discussion of legal
issues pertaining to IT, contracts, and intellectual property (Montana 2000) and notes
the complexity of integrating customized ERP technologies that may look similar but
contain significant structural differences (Shearer 2004).
The elusive dependent variable
It is worth noting that the outcome of interest in the merger and acquisition is not
as well defined as might be implied from the heavily financial orientation of such
activities. In part this is because so many influences on organizational performance
occur at the same time that it is difficult to isolate the impact of a particular event such
as the merger. It is also because there are many different stakeholders for such an
activity and it is unlikely that even the most successful merger will benefit all equally or
the most unsuccessful work to the disadvantage of all equally. It is not unobserved that
in some circumstances a merger can dissipate stockholder wealth, but create significant
benefits for the management of one or both merging entities.
In the financial stream of merger and acquisition research, stock price with
various tactics for accounting for other influences such as overall market movement is
used as a surrogate for whatever assessments investors take into account when
judging value. This is based largely on the notions that large groups will combine
individual judgment into accurate collective assessments and that information quickly
distributes through the continual feedback loops of reporting and action that comprise
an active market. Stock price, however, can be influenced by many factors unrelated to
the merger such as shocks in supply of complementary goods, development of new
products and production innovations, and many macroeconomic factors including
interest rates, exchange rates, and trade deficits. Although statistical approaches can
attempt to distinguish the effect of various influences on stock prices, this remains a
fairly blunt instrument for measuring the variety of outcomes of the merger as they affect
varied stakeholders.
In the personnel stream of merger and acquisition research, the attitudes of
individual employees following the merger are used as an outcome variable. For
example, Nikandrou, Papalexandris, and Bourantas, D. (2000) measure levels of post
merger trust as an indicator of success. Though it is logical that one would find
alignment of positive worker assessment of the merger and the ability to create future
value, there is little in the literature linking these attitudes to the financial value of the
merged entity or to its change in potential for future value creation.
It is also clear that the DeLone-McLean success model is also difficult to apply in
this circumstance. Issues of system quality, information, and service quality might be
reasonably used to contrast post-merger states of multiple organizations, however, the
variations in quality among pre-merger entities, differences in expectations regarding
service levels, and contingencies based on differing merger strategies present a
staggering array of combinations. Contrasting post merger states may well mask a wide
range of levels of challenge faced by different merging entities. Is the important
characteristic the final result or the distance moved? Use is also difficult to apply to an
organizational function in contrast to its use in assessing a particular technology. User
satisfaction tends to line up with the personnel view if we consider satisfaction of both IT
personnel and users of IT services. All this said, net benefits is still the difficult
construct to conceptualize, much less measure.
A potentially valuable outcome of this study will be the examination of what
principals in the merger of IT functions themselves consider success to be comprised
of. We would anticipate a combination of financial and personnel measures which may
be instantiated through a set of goals achieved or not achieved, rather than through
more direct measurement.
The purpose of this research paper is to explore the range of aspects involved in
the integration of MIS functions following merger and acquisition activity. To that end,
more specific questions include (see appendix 1 for interview protocol): How do firms
define and measure successful integration following merger and acquisition? What are
the apparent outcomes of varied strategies for MIS function integration following merger
and acquisition? What specific actions and tactics facilitate efficient and effective MIS
function integration following merger and acquisition? What specific actions and tactics
facilitate efficient and effective MIS support for merged business processes and other
organizational assets following merger and acquisition?
Method
Based on a grounded theory approach (Glaser and Strauss, 1967; Locke 2000),
the researcher will generate a comprehensive catalog of CSFs. Data will be collected
through interviews with a wide variety of MIS and business professionals who have
directly experienced integration of MIS functions between acquired and acquiring firms
following merger and acquisition. See appendix one for the interview protocol. Where
permitted by research participants, interviews will be tape recorded and transcribed.
The study uses human subjects and been approved by the Saint Louis University
Institutional Review Board (15379).
Sampling of interviewees grounded theory studies is targeted to maximize the
diversity of observations and test the robustness of tentative findings across related but
not identical situations. Sampling is continued until data ‘saturation” or the unearthing of
no new ideas is observed. Although the required number of interviews may vary from
one study to another, users of this method tend to find saturation with approximately 30
interviews (Locke 2000).
Data will be analyzed using a predominantly inductive approach were close
observation of comments by interviewees will lead to elemental identification of factors.
These factors will be clustered where similarities exist. They will also be considered in
elemental cause-effect pairs (Larsen and Niederman, 2005) that will result in the
creation of causal maps at the individual interview level that will be further aggregated
across all interviews into an overview of the many interrelated elemental factors leading
from management policy and actions to specific results. The use of causal mapping
highlights the relationships between actions, policies, and outcomes. It both shows
aggregated “big picture” effects while preserving details that may be highly influential
yet subtle. The researcher has effectively used this method in a prior study of the role
of Unified Modeling Language in project success (Larsen, Niederman, Limayem, and
Chan, 2009).
This study’s grounded approach will be similar to that taken by Graebner (2004)
who looked more broadly at the overall integration issues involved with merger and
acquisition activity. However, this study will additionally use a causal mapping
technique for interpretation of detailed level findings.
Current Status
So far 10e interviews have been completed. The last is still in the process of
being transcribed. These have included discussions with three CIOs, including one
Fortune 100 company, three IT workers involved with the mechanics of completing
merger and acquisition integrations, and two heads of departments specializing in MIS
post-merger integration specialists at Fortune 100 companies.
Initial observations include:
Interviewees. Few interviewees have participated in only one merger or acquisitions,
some have participated in dozens. As a result most interviewees provide observations
on specific actions and policies that work and where their absence does not work;
provide observations on variations in actions and policies that result from both varied
circumstances and the effect of learning from prior experience.
Size Matters. It is clear that the merger or acquisition of evenly sized entities either
large purchasing large or small purchasing small differs significantly from large entities
purchasing smaller ones. In the latter case, the purchasing organization can set up task
forces and regular procedures to minimize the difficulty of such integration and
regularize procedures. Generally with this situation the authority for action is in the
hands of the larger firm, this is universally recognized, and the issue becomes one of
most effectively creating the new IT entity. It can become a challenge in this
environment for the acquiring entity to insure that it is carefully screening in the
beneficial practices, employees, and assets of the acquired firm. In the evenly matched
integration, many more issues need resolution before the integration of IT functions can
move forward from a more technical perspective. It is often not clear how the overall
new entity will operate, where lines of authority will run, and what the new culture will be
like. The unresolved nature of these issues creates uncertainty about the larger needs
and preferences that will structure IT decisions. As a result, the integration of IT may be
slower, may take steps that need subsequent reversal, and may risk losing
opportunities for retaining personnel, improving systems and services, and taking
advantage of new license opportunities.
Success measures. Success is rarely if ever formally measured per se, however,
specific indicators may be measured rigorously and in detail, measurement of on-going
organizational indicators continue to provide monitoring of merger activities in some
cases, and setting goals and checking off their completion is a frequent approach to
monitoring merger progress and ultimate assessment.
Personnel. Approaches to personnel vary widely, from dismissing (over some time) all
of the acquired firm’s IT workers to programs and bonuses for retention. In one
particular case, the acquiring firm did not want to pay severance to the workers from the
acquired firm so, reportedly, demoted them and gave extremely un-inviting tasks until
the majority of these workers left without the costs of severance. Another tactic seen in
multiple examples is the interviewing and assessment of all acquired firm IT personnel
with the objective of matching skills to future needs of the post-merger organization.
Culture. Virtually all respondents point to cultural difference as a key block to
successful integration. The cultures of the firms overall may determine success of the
merger. However, cultures of the IT operations do not always reflect the overall firm
culture. A main descriptor of cultures that appear to be important specifically related to
IT include “entrepreneurial versus reactive [researcher’s terms]” and “service oriented
versus technology oriented”. It is interesting how the culture and individual workers’
attitudes tend to overlap. It is worth pondering if the judgment regarding the overall
cultural colors the judgment regarding the potential of individual workers. Another
aspect of culture pertains to decision making style. Organizations tend to vary on the
politicization, the timing and speed, and centralization of decision making. Also
organizational MIS varies greatly on amount of outsourcing. Although not frequently
seen in interviews so far, where organizations vary greatly on their attitudes toward
outsourcing, this provides special concerns for the integration of MIS functions. This is
reflected in the findings of Meera and Hirschheim (2007). Where the acquired and
acquiring firms vary greatly in these areas, they have a more challenging process to
create integration in the new entity,
Timing. It is almost universally held that the more quickly the difficult elements of the
merger are handled, the more successful the end result.
Learning. Almost no organizations had a formal approach to cultivating lessons from
prior merger actions for their application in future ones. However, some organizations
that purchase many companies have developed a procedure for managing such
acquisitions. In one case a set of “tiger teams” move through a prescribed set of
activities aimed at assessing hardware, licenses, procedures, and personnel then acting
toward building the new combined structure. However, even in this case the
respondents emphasized that all mergers hold surprises – some positive like systems
that perform tasks or perform them better than the acquiring firm was aware of and
others negative like systems with weaker than expected controls and governance. The
key, according to this respondent, is moving through the structured program but with
sufficient flexibility to take advantage of serendipitous benefits and minimize negative
surprises. Virtually all individuals responsible for integrating IT following mergers use a
checklist and everyone using such a checklist reported upgrading it periodically to
integrate new learning. Interestingly, this process was always undertaken by the
individuals involved and was not an organizational activity.
Conclusion
Clearly the research remains at an early state. Initial observations are subject to
significant revision as the project moves forward. My intentions include finer analysis of
specific actions taken in the integration process and the observed results experienced
with these; more formal inductive analysis of interview comments; and the development
of a contingency theory emphasizing differences in firm and merger strategy on the
effectiveness of particular approaches to integrating the MIS functions from pre-merger
organizations into the post-merger entity.
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Appendix 1 – Interview Protocol
1. How many mergers have you been involved with?
a. For each, what sort of product was the acquired company producing?
b. To the best of your knowledge which of these were important motivations
of the merger…
i. To add complementary products?
ii. To absorb competing products?
iii. To add key technical personnel?
iv. To add key sales and marketing personnel/competencies?
v. To add to a diversified portfolio?
2. What merger strategy has been followed: absorption where the target company
ceases to exist; symbiosis, where the strengths of each company are combined;
preservation, seeking to retain the independent strengths of each merging entity)
3. What was the role of IS in discussions prior to the merger or acquisition?
4. What IT integration strategy has been followed?
a. abolishing all IT of both partners and replacing them both with a new IT
b. closing all IT in one partner and using the IT of the other combining the
best of both parts
c. coexistence with periodic synchronization of redundant parts.
5. How would you describe the culture of …
a.
b.
c.
d.
e.
The buying firm?
The buying firm’s IT department?
The acquired firm?
The acquired firm’s IT department?
The process of blending cultures following the merger
6. Changes in the competitive environment during the time period of the
integration?
7. What were the corporate expectations regarding MIS integration requirements
and associated costs?
a. What sorts of measurements were made regarding the inventory of MIS
assets and personnel and how were they valued prior to the merger and
acquisition?
b. What sort of planning was conducted (and when) for the integration of the
MIS assets and personnel for the acquiring and target firms?
c. What methods were used to implement the integration of MIS assets and
personnel following the merger or acquisition?
d. How were the integration results evaluated? At what point in time? How
were “lessons learned” organized for application to future mergers and
acquisitions?
8. Intellectual property
a. What steps were taken to assure continuation of intellectual property value
relative to IT assets?
b. Where any of the following investigated?
i. Patents
ii. Copyrights
iii. Licensing
iv. Trademark
9. Process of IT integration?
a.
b.
c.
d.
Who was put in charge of the integration of IT
How was the technology portfolio assessed?
What measures were taken to set up communication during the transition?
How were physical technologies integrated?
i. What special arrangements were made for “day one” performance?
(integration of email, intranet, and file transfer, for example)
ii. What actions toward consolidation of systems were undertaken?
iii. What actions needed to be taken to integrate data and data
structures?
e. What actions were needed to deal with scalability issues?
f. How were staffs integrated?
i. How were conflicts resolved?
ii. Internal conflicts among key decision-makers between and across
the organizations
iii. Development of roles and identities at the upper echelons of
corporate hierarchy
iv. Power relations between key actors
v. People’s personal ambitions and projects
10. Outcomes (How would you describe the merger’s effects on
a.
b.
c.
d.
e.
f.
g.
h.
i.
Firm Financial performance?
Firm Retention of key personnel?
IT retention of key technical personnel?
IT retention of key IT management personnel?
Satisfaction of integrated management?
Satisfaction of integrated IT management?
Unexpected benefits?
Learning from one’s own and others’ experiences
Are there other important outcomes of the merger and acquisition process
that you observed?
11. Overall, in your view, what actions or policies led to (or inhibited) the relative
success of this project?
12. Is there anything we may have left out of the interview that you believe is
important for understanding the role of management of MIS in the merger and
acquisition process?