How Business Intelligence is critical to both risk and opportunity in an M&A

Posted on Thursday 18th September 2014 9:30

Successful M&As require watertight plans for organisations to metamorphose into data-tight IT infrastructures.

Merger plans need to include comprehensive risk considerations and knowledge about the parties’ current infrastructures. They must be executed with speed to avoid business losses and all the care of microsurgery to avoid data loss. Many studies have found that only 30% to 40% of mergers and acquisitions were successful1 and 70% of companies overestimate the level of synergies that merging would bring2.

That action plan is in effect a structure of interconnected business decisions. Each decision – and respective risk assessment – must be based on precise, infallible data involved with all operations in all departments of both businesses.

Information from disparate sources must converge in a way that maintains its quality; with reliable consistency and up-to-the minute acuity. One disastrous example of ‘invisible’ data is Quaker Oats’ 1994 acquisition of drinks company Snapple for $1.7bn – sold 3 years later for $300M. Snapple’s revenues dropped dramatically by 72% in the quarter before the acquisition, compared to the previous year, which seemingly failed to ring alarm bells3.

For organisations to be able to reliably use all available data to make optimal decisions is achieved with a healthy Business Intelligence environment. All organisations will benefit from being able to draw information from different departments in inter-compatible formats. Extending this model to the case of M&As, C-level executives need to share and gather data across organisations; enabling the flow of data from subsidiaries to holding companies, or resellers to distributors. This is a practice with which Influential Software has a 21-year history, covering over 20 client acquisitions; identifying, understanding and enabling the flow of the right data into the acquirers’ systems, especially in Publishing.

Thus, we recommend ensuring an organisation’s Business Intelligence estate provides an accurate picture of corporate operations at the point of gathering information to prepare for a merger or takeover. We offer a routine heath check, which not only seeks to resolve any known issues, but thoroughly assesses a Business Intelligence solution to identify any possible problems.

Organisations must never be exposed to non-compliance of any kind. With a clear, consistent picture of financial activity, Business Intelligence not only provides assurance that a company complies with the full range of legal regulation, but the ability to rapidly demonstrate this if such a response is required. This remains possible from the start of the due diligence process and throughout an acquisition when transactional data from difference sources can be united without inconsistencies to form a ‘single version of the truth’.

Outside company data, public sentiment towards a company is essential for navigating a course within the marketplace. Business Intelligence can analyse Social Media posts to gauge feelings shared about an organisation, which may or may not match the way its leaders believe it is perceived.

Having completed the successful integration of companies, avoiding costly problems, creating a new organisation is a momentous opportunity to redefine the shape of its operations; to optimise this new, unified system of information flow. We help organisations to design the Business Intelligence environment to suit the needs of the organisation in the form it plans to have in the future, with strategic steps to scale up and enhance a Business Intelligence solution to suit the operations and business logic flow, as your organisation develops; avoiding the need to revise and replace a solution, but rather continuing to derive value from previous investment.

Influential Software is in a position to draw on our long, varied experience of not only ‘tuning up’ Business Intelligence solutions to best fulfill requirements, but keep the flow of data ‘in tune’ between different departments or companies.

For a more detailed analysis of what CIO/COOs needs to consider for optimal M&A integration, please see our article relating to the merger of Pearson and Bertelsmann.

For further advice, please contact us.

1. Finance Director Europe

2. Why some merging companies become synergy overachievers, Bain & Company 13.09.14

3. Ibid. + New York Times, 28.03.97. This and other M&A disasters: Investopedia.

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