Abstract

Information system integration during merger and acquisition (M&A) is a critical process when organizations are joining. The integration process consisting of several crucial activities for making organizations being able to work together. Organizations need to evaluate internal and external factors in order to make the process work. In this paper we evaluated critical success factors, challenges and information systems (IS integration methods from interviews with employees in a case study to identify the most critical activities for a successful IS integration. The investigated process stretches from the introduction of the M&A to the actual integration of two organizations IT-stacks. The identified crucial activities found were top management support, organizational culture, importance of competence, internal communication, maintaining information system security, communication with end-users and managing legacy system. Evaluating these topics and creating a short and a long-term plan on how to integrate and work with these are essential to succeed with the IS integration in any M&A.

Introduction

One way for organizations to grow is through merger and acquisition (M&A) which could be an excellent opportunity to expand but are equally as challenging. Henningsson, Yetton [1] mentions that 60-70% of the M&As causes organizational problems rather than creates financial values. One process that is problematic and cause confusion is the information system (IS) integration, which today plays a central part in the realization of an M&A. According to Sarrazin and West [2], 45-60% of the expected benefits, such as financial gains and market shares, are directly dependent on IS integration. Accenture [3] reports that IS integration is the second most important reason for M&A failures, which can cause billions of dollars in losses if not prioritized.

IS integration related to an M&A is often described as consisting of the same key processes including due diligence and the IS integration processes [1, 4-7]. These processes, together with success factors and challenges, create a blueprint for how IS integration can be done in practice. However, reality is more complicated, and the realization of the process is one of the most critical steps of the M&A [5]. Haspeslagh and Jemison [8] have broken down the M&A process into two phases. The pre-phase and the post-phase, where the most critical phase is stated to be the pre-phase [8]. Henningsson [4] later redefined these phases, including several sub-processes. Harrell and Higgins [6]; Lam [9] as well as Soliman, Clegg [10] identified several success factors and challenges that are critical to a successful IS integration. Another identified challenge in the literature is organizational culture. During the integration of two companies, organizational culture is considered as an important challenge to manage [11]. According to Henningsson [4], only 18 % of the M&As deals with post-phase challenges, while 82 % struggle with pre-phase challenges. Technology integration during an M&A is a crucial part of the upcoming organization. All major processes of an organization are dependent on the information IS provides, e.g. decision-making, resource allocation task performance, risk identification [6, 12].

Conclusions and future research direction

This paper discuss the question: What needs for making an IS integration a successful system integration in an M&A? It does so from a process perspective, and it can be concluded that merging organizations need to consider some activities carefully before the IS integration takes place. Top management support is of high priority for employees to be able to complete the process of IS integration. Except for the categorizing of phases, the main distinction between literature and practice in this research is the importance of evaluating work methods when legal restrictions are still in place. Finding a way to conduct the IS integration during the time organizations cannot talk to each other is important for the day one launch of the new organization. To have functioning IS at day one, the organization needs to have clear communication and integrate the two organizational cultures with a short and longterm plan. This plan should also include the structuring of the combined IT-stacks and should evaluate which systems to kill or to re-invest in. Organizations also need to put effort into merging the cultures and unite employees early in the M&A. It will facilitate the workflows between employees and involved organizations. Transparency is crucial in and between involved organizations. This transparency is especially important from top management level, that clearly needs to communicate organizational goals, integration methods and approaches to all levels of participating organizations. It can also be claimed, even if the respondent did not give it high priority, that manage the question of legacy systems is crucial. The merging organizations need to have a working solution up and running at the day one launch. Otherwise, it could have consequences for the customers due to unavailable services. Hence, it is not viable for the future, building on old systems. It will eventually end up in technical debt, costly to both invest in and to deconstruct.