Activity in the mergers and acquisitions (M&A) space continued to grow in the 2019 financial year, with 63 M&As involving companies listed on the ASX being reported in FY19, a 12% increase compared to FY18.
And, as Australian companies continue to adapt to the changing working environment and assess current business needs and requirements, it’s possible that this activity will continue its upward trend into FY21. This means organisations need to be aware of the importance of due diligence in M&As, especially when it comes to evaluating the all-important IT systems and processes, according to Acclimation.
As working practices continue to evolve across Australian companies, business executives will likely be assessing the current environment and market standing. M&A may be the solution for many companies needing to garner a more competitive market advantage and create more sustainable businesses to ensure resilience in a changing economy.
Rod Taubman, managing director, Acclimation, said this process can provide companies with greater competitive advantage, by facilitating economic growth through acquiring new customer databases, greater geographic footprints, new economies of scale, or even IT assets, systems, and processes.
M&As help organisations become more strategic, creating complex assets and entities that deliver increased business and higher value over time. However, it’s critical that executives don’t lose sight of the drivers for M&A and devalue the acquisition, especially when it comes to the IT infrastructure of the companies involved,” Mr Taubman said.
“Understanding how much value and success is tied to the IT systems and processes of a company is crucial when it comes to M&A. With such complex entities being created through M&A, it’s becoming increasingly important that organisations can preserve the value inherent in the IT systems and infrastructure being acquired.”
The increasing business reliance on technology means that a lot of systems house and generate important business assets, including intellectual property and customer records, supply chain efficiencies, compliance and governance records, and even data relevant to forecasting and planning.
There’s an incredible amount of value that might be tied up in IT systems that is never extracted or built upon, and M&As can collapse and lose value due to an inability to efficiently integrate systems, or through a desire to get rid of an incumbent system during a merger,” Mr Taubman said
“It’s critical that M&As take IT infrastructure into account, and that proper assessment and planning is conducted when integrating systems. Leveraging existing technology investments can ensure that no data or value is lost during an acquisition. For enterprise resource planning (ERP) software, finding solutions that can integrate with different systems is key to business continuity, as this can facilitate data transference, making sure relevant information is carried over from existing systems during M&As.”
By leveraging existing technology investments in M&As, and integrating existing systems where possible, acquisitions will also be more successful when it comes to retaining talent. Technology ranks among the top 10 reasons that Australian workers leave their roles, and rapidly changing technology processes during M&As may result in a loss of core talent for companies.
“Having difficult-to-use systems or IT infrastructure that results in double-handling can create poor working environments, and this can be a big driver for people changing roles. People are a huge asset for M&As, so losing people, especially because of poor technology choices, can lead to a significant loss of value for an acquisition,” Mr Taubman sai