In the wake of the COVID-19 pandemic, corporate mergers and acquisitions (M&A) are occurring at a record pace. Yet, according to the Harvard Business Review (HBR), the sad fact is that most of them (70-90 percent) can be expected to fail.
Why are successful mergers and acquisitions so difficult to pull off? As the HBR points out, the most common reasons for M&A failures are problems with integrating the two companies. Of course, many integration failures result from the difficulty of combining disparate corporate cultures and operational processes. But one of the most important factors is basically technical in nature.
Most companies today are intensely reliant on digital technology. And with the ongoing emphasis on digital transformation across the business spectrum, they are becoming more so every day. That means that the organizations involved in a merger or acquisition both come to the table with their own well-established but often dissimilar information technology operations. Failure to effectively integrate those operations is a recipe for M&A disaster.
Daniel Newman, CEO of Broadsuite Media Group. puts it this way:
Lack of foresight when it comes to merging IT systems is one of the biggest roadblocks to a successful merger and acquisition… Each company likely brings its own data centers, hardware, back up plans, and applications, which all need integration.
Why IT integration is a critical issue for mergers and acquisitions
It's all about data. Modern business enterprises are utterly dependent on having access to accurate, reliable, up-to-date information about customers, suppliers, market conditions, and their own internal operations. If difficulties in merging the IT operations of the partners in an M&A process inhibit the free flow of information from one part of the combined enterprise to other areas where it's urgently needed, the consequences can be disastrous.
What's needed are technological bridges—software applications that can access needed information wherever it resides in the newly combined corporate entity, and make it available in a usable form throughout the organization. And the solution that has proved itself as the best option for creating such applications, quickly and cost-effectively, is low-code software development.
What is low-code software development?
The main feature and principle benefit of the low-code approach to software development is speed in design and deployment. Designers create apps with the functionalities they desire by dragging and dropping pre-written code modules and templates into an appropriate arrangement using a Graphical User Interface (GUI). Since as much as 90% of the app's functionality is embodied in those pre-written modules (leaving only about 10% to be coded manually), the process of designing, testing, deploying, and updating new apps is substantially quicker than with traditional software development methods.
How low-code facilitates integration between M&A partners
With a low-code platform, designers can quickly create apps with the specific interfaces needed to access legacy systems throughout the organization, and convert their data into formats accessible to other members of the new corporate family. That allows stakeholders to have a comprehensive view of the combined entity's entire range of information resources.
An example of how this works is the experience of Fidelidade, a leading insurance company in Portugal. After being involved in a number of mergers and acquisitions over the previous decade, Fidelidade had a huge problem of aligning the teams and technologies of its various component parts with its overall corporate IT strategy. eSystems partner OutSystems provided a low-code solution that seamlessly integrated new and legacy systems across the company.
Craig Walker, CIO at Shell Downstream, which uses low-code to build digital services for the company's mergers and acquisitions unit, among others, has his own testimony of how low-code development has impacted his operation:
I can drag and drop a few things and someone can look at that data and say, "Wow, that tells me something I didn't know."
Walker adds that Shell now hand writes code only for specialized applications that they can claim as their exclusive intellectual property, or which provide a competitive advantage.
How low-code facilitates M&A integration
Low-code can provide considerable benefits in almost every area of a company's operations. But there are two areas in which its contributions are particularly critical.
Low-code and Master Data Management
Low-code development has proven to be a great tool for implementing one of the most crucial functions needed for a successful M&A process. Master Data Management (MDM) allows a newly combined corporate entity to create "a set of accurate, up-to-date master records that can be referenced as the 'single source of truth' for each significant person, place or thing that the business references in its day-to-day operations."
Having that "single source of truth" after a merger or acquisition is an absolute necessity. Otherwise, information that refers to the same item may be stored at multiple locations around the newly combined company, but may differ in its content or freshness. For example, companies A and B have merged to form the AB company. The company A record concerning a mutual customer, John Smith, gives his recently updated address as 123 Elm Street. But the company B record was never updated, and still states Smith's address as 456 Oak Street. When workers at the new AB company access John Smith's records, which address will they receive?
MDM ensures that whenever information about a particular item or person is accessed anywhere across the organization, the data that is supplied will be consistent, accurate, and up-to-date.
Low-code and procurement
A similarly critical function for newly merged companies is supply chain integration. According to Robert Kugel, senior VP and research director, Ventana Research,
One of the most common reasons [for M&A failures] is that the expected operational synergies weren't realised because post merger integration of their sourcing and supply chains weren't handled properly.
When companies merge, the complexity of each entity's supply chain arrangements often makes integrating the two extremely difficult. Without accurate and up-to-date information from both of the pre-merge companies, achieving a successful integration becomes even less likely. As supply chain analyst Steve Rice declares:
Without a single, digital supply chain management platform to bridge these "data silos", the potential ROI of the M&A transaction can be tainted by excess inventory, poor customer service, and poor response capabilities to newly acquired customers' demands.
Low-code apps have proven to be invaluable tools for consolidating supply chain data into a form that is accessible and consistent across the merged organization.
How eSystems solutions simplify M&A
In collaboration with its industry-leading automation and integration partners, Workato and OutSystems, eSystems offers low-code solutions that drastically simplify the M&A process. We enable consolidation across the organization with robust integrations that provide cost savings, transparency, and above all, speed. No more struggling with missing data, broken processes, or manual workflows. Through the powers of low-code, eSystems can automate workflow processes while ensuring data accuracy and completeness, making M&A transitions both easy and fast.
You can occupy the driver's seat in your merger or acquisition process! To find out how eSystems can help you revolutionize your M&A experience, contact us today.
WRITTEN BY: Mika Roivainen | Chief Digitalization Officer