Integrating business: the key to successful mergers and acquisitions

A staggering volume of mergers and acquisitions (M&A) have taken place over the last two years. In 2015, the value of M&A transactions peaked at US$4.5 trillion globally, according to Thomson Reuters, while 2016 saw 46,000 transactions completed.

In Australia, M&A activity jumped 47% year-over-year in the fourth quarter of 2016, exceeding the Asia–Pacific regional average of 44%. While this doesn’t measure up to rates in some developing areas — India experienced a 100% hike in the same period, while Southeast Asia saw an increase of 49% ­— the year ahead looks quite robust. Meanwhile, many companies are also pursuing divestitures as part of strategic re-evaluations (including those to shed underperforming assets).

Whatever the catalyst for M&As, there are instances aplenty where these initiatives have failed as a result of ineffective technology adaptations. In many scenarios, these failures are a consequence of poor integration — organisations expect two environments to simply interoperate so long as high-level business strategies are aligned; this is a damaging misconception. In reality, the faster two or more entities can migrate into a stable, unified environment, the better the results for all parties.

It is, therefore, no surprise that as M&A activity intensifies there are a host of questions among business executives, who understand their companies can suffer unexpected costs and delays without sound strategic planning and technology choices. Post-M&A business disruptions can trigger customer churn, revenue loss and brand damage.

The big questions when it comes to M&As include:

• How we do we accelerate the transition during a merger or divestiture?
• How do we leverage the acquired company’s data quickly?
• How do we align disparate applications out of the gate?
• How do we give our newly joint workforce a collaborative environment?

For a merger or a divestiture, a modern approach to app and data management is critical. While every company has its own set of mission-critical apps — usually both cloud apps and heavily customised legacy systems — it is vital that systems work together from day one.

In a divestiture, for example, the spun-off entity often has only a few months to move from the systems it previously used to a new app environment. That contractual deadline raises the stakes for a fast implementation of new apps. Those new apps need to hit the ground running with automated processes and data visibility.

With deal-making on the rise, we’re seeing more companies turn to the integration platform-as-a-service (iPaaS) model as a catalyst for M&A success. iPaaS lets organisations connect apps and data far faster and more easily than point-to-point coding or on-premises middleware. That helps organisations move through a business transition as seamlessly and cost-effectively as possible.

To succeed with an acquisition or divestiture, companies not only need to move fast with their data integration to avoid business disruptions, but they also need to be able to govern and protect their data as it migrates from one entity to another.

American Express Global Business Travel is a great example of a company that has turned to iPaaS to streamline and speed its business transitions during a divestiture. Created in 2014, when American Express spun off 50% of its business travel unit, American Express GBT faced a tight timeline. It had to move from its traditional on-premises apps to a portfolio of modern cloud services for enterprise resource planning (ERP), customer relationship management (CRM) and human resources. The US$20 billion global company also needed to migrate existing data and ensure interoperability across a new set of cloud apps.

“We knew an integration platform was a prerequisite,” said Prasant Panicker, engineering director at American Express. “We had a quick turnaround on investment — complex integrations were built in a compressed time frame with fewer resources.”

In all, the company is now running 80 internal integrations and 240 business-to-business integrations, supporting about 320 million transactions a year.

A fast and seamless transition to the new state is critical in an M&A situation to mitigate not only the risk of disruption to the business, but also customer interactions. Effective and smart data integration that requires minimal resources plays a key role in ensuring this desired outcome, and subsequently mitigates the consequences of misaligned strategic execution of M&As.

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