Wednesday, April 17, 2024

Handling IT and Data Integration in M&A: What the Borg Teaches Us

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by Simon Moss

Mergers and acquisitions can enable companies to expand or create new services, enter new geographical markets, and enhance their product portfolios. They represent enormous opportunity. There were 44,000 mergers and acquisitions with a total value of more than $4.5 trillion in 2015 alone, according to the Institute for Mergers, Acquisitions and Alliances. However, it’s the post M&A integration and execution that really delivers the business value.

Mergers, acquisitions and conversion justification is predominately based on competitive synergies, customer base leverage, critical mass in the go-to-market strategy or balance sheet strengthening. Yet these foundational elements to the business thesis are often slowed, or even undermined by the need to physically integrate large numbers of legacy systems and data. The business case is compelling. The execution of that business case is often fraught with integration difficulties, opacity and execution costs that are all too often underestimated in the original business case.

As a result, the value of the merger is often delayed, is amortized over a much longer period of time or the costs of managing the merged or converted entity is much less efficient and valuable. In conversions this risk is usually covered by some impressive legal contract. In M&A it’s straight caveat emptor.

What’s the challenge?

Let’s assume a solid business case and commercial justification are made. The execution then focuses on organization – a cultural assimilation of teams and individuals to rapidly build a joint culture. Some firms are amazing at organizational economies of scale, others encourage a culture of competition between acquired entities and so have considerable organizational overlap. It becomes more of a cultural execution than anything else and often it’s based on strength of leadership and commonly agreed objectives on the merger across both enterprises. Execution when it comes to systems and data integration however is considerably more complex and problematic.

On the whole these activities can be broken into several, though related categories: rationalize the M&A technical architecture; establish common data and reporting standards from the customer, product and pricing information, through to consolidated risk, compliance and AML; standardize systems and applications platforms; and put in place customer management and on-boarding across the new architecture.

The key to a successful M&A and the resulting operational effectiveness of the merger lies in how quickly and effectively IT integration and conversions can be achieved in order to achieve the cost and competitive efficiencies expected.

It’s not easy. The failure rate for M&As is somewhere between 70% and 90% according to Harvard Business Review. The reasons that the expected profits don’t materialize are often complex, but IT and data integration and conversion activities are a big part of it. This IT element is often a multi-year systems integration project, with significant, often misunderstood variable costs and a high degree of risk.

So how do you remove that risk, drive down the cost of the merger and achieve the time to value and margin on a merger?

First, let’s remove the hype in the market and define the problem correctly. To start with, the problem of M&A is not a “Big Data” problem like some say.  Far from it actually.  The idea that enterprises are sold about how to extract value from their data is based on the assumption that most enterprises are technically homogenous like Amazon, Google, or digital retailing, social media companies or other “young” enterprises. This is a pipedream for the vast majority of enterprises.

We must accept that realizing the value of M&A, conversions and a huge category of other business problems are not Big Data challenges and cannot be solved with traditional deployments. Rather these challenge are complex because of distribution and diversity. They are only “Big” when the only way to solve that distribution and diversity problem is to put everything in one place – a self-fulfilling, and ultimately futile approach.

Solving the diversity problem and extracting value despite distribution and diversity

So to the Borg, easily Star Trek’s best adversary (maybe apart from Khan). A race of beings that rapidly assimilated planets through common, consistent integration with remarkably little destruction. In other words they went to the worlds with their assimilation engines and merged those worlds in situ. Seems obvious, given it’s tough to move planets. But it’s also tough to build a consolidated general ledger and yet we try to move all the elements into one place before creating it.

So what if you forget about moving all the data into one central location? What if you halt the impossible task of normalizing data from disparate sources? What if you accept that the complexity is only going to increase over time as companies adopt new cloud services alongside legacy systems? Maybe on M&A, reporting, business intelligence, customer awareness, supply chain transparency and a vast number of other problems, you don’t need to solve a big data problem at all, but rather a diversity and distribution problem.

What if, instead of bringing the data to the analytics, through all the tough integration challenges that that presents, you send the analytics to the data? As a result, the business value, the merger business thesis can be decoupled from the data and systems integration requirements.

The business value – the reason for the M&A action – becomes virtualized, abstracted from the source system and data integration requirements, residing as a “fabric” over both companies’ data centers and technology, targeting data and applications, and only providing information that is needed. A flexible, configurable fabric that can be layered on top of multiple silos across companies can cut to the chase and start extracting value immediately. There’s no need to refactor IT systems and governance control is easy to deploy and maintain. It’s a non-invasive approach that enables you to leverage all of your existing systems.

The result is the business objectives are achieved and realized without the need to wait for the technology and data integration. The business case is achieved in weeks, not years. The next merger is done the same way, enabling multiple companies to be targeted and then assimilated with business value being realized for a fraction (around 20%) of the time and cost of traditional approaches.

Staying on the right path

Sure, the technology needs to be integrated eventually. But delivering on the business value first takes the constant pressure off the IT merger, and that can then be done with diligence and rigor, without constant demands for haste from the business.

So an assimilation “fabric” that targets required systems and data, analyzes and creates results, products, even new operating models without the need to centralize, homogenize or move data from operating systems enables an M&A to fulfill business value in weeks, rather than years. The Borg would be most proud.

For more insight on this topic, see an interview with the Author that appeared in Barron’s.

About the Author

Simon Moss is Chief Executive Officer for Pneuron Corporation, a business orchestration software provider. He was previously CEO of Avistar and CEO at Mantas, later acquired by Oracle. He served as Partner at Price Waterhouse Coopers, and was co-Founder of the Risk Management Services Practice at IBM. Moss is also on the Board of Directors for C6 Intelligence. Contact him at

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